Bitcoin Breaks $40,000: A Milestone and Many More to Come

Bitcoin, the No. 1 cryptocurrency both by market cap and fame, has once again captured global attention by breaking the $40,000 barrier. This is the first time BTC has stood above the $40,000 mark since April 2022, a significant milestone as well as a testament to its resilience and growing acceptance in the financial world. Since its inception in 2009, Bitcoin has experienced a rollercoaster of highs and lows, symbolizing both the possibilities and the volatility of digital currencies. The recent surge past $40,000 marks a notable moment in its journey, prompting questions about the factors driving this increase and what the future holds for this digital asset.

BTC/USDT chart since March 2022

Behind the surge

Although there was no direct cause behind this historical surge, momentum has been building up over the past month and even the entire 2023. The two culprits behind 2022’s bearish run - Do Kwon and Sam Bankman-Fried - were arrested and extradited, and Bankman-Fried had already been declared guilty by the jury just a month ago.

The prospect of trading a spot BTC ETF for the first time also contributed to the surge.BTC has been going all the way up since rumors of the SEC’s approval of spot BTC ETFs surfaced. Although there is no information about the exact date yet, hype has been building up ever since. Galaxy Digital even published an estimation of $14 trillion for the market size of spot BTC ETF one year after its launch.

What came with the optimism about the SEC’s approval was the anticipation of an interest cut by the Federal Reserve. Markets interpreted recent comments from Fed Chair Jerome Powell as less hawkish, suggesting a need for balance between tight monetary conditions and fostering economic stability. The prospect of lower interest rates is favorable for Bitcoin, as historically, easy monetary policy has correlated with increased speculative trading and higher cryptocurrency prices.

Another potential catalyst, proven several times by the market, was BTC’s halving event scheduled for 2024. Halving is a mechanism that increases BTC’s mining difficulty while reducing miners’ rewards by half. For more information about BTC’s anticipated halving in 2024, refer to our top 10 questions answered. Historically, halving events, which effectively slow down the rate of new Bitcoin entering circulation, have led to significant price spikes. As the next halving approaches, investors might be buying Bitcoin in anticipation of a similar price movement.

More to come?

Looking ahead, Bitcoin's trajectory remains a topic of intense interest and speculation.

Although many investors may sell their BTC holdings when spot BTC ETFs launch, others may see it as BTC’s stamp of approval from the traditional financial sector and even the public at large. Capital may be flowing into the crypto market, providing more stability and growth for BTC’s price. Should the Federal Reserve cut interest rates in the coming months, investors will seek high-yielding assets such as BTC and other cryptocurrencies.

The halving event is also months away. Since past halving events all initiated significant bull runs for months, we may still see more investors and speculators betting on this upcoming event, pouring more and more capital into BTC.

Closing thoughts

BTC’s break above $40,000 reflects a complex interplay of economic factors and market speculation. While the future is uncertain, understanding these underlying dynamics will provide valuable insights for investors. Although cryptocurrencies have been known for their volatility and high risks, we are fortunate enough to witness these milestones in the history of BTC, the first blockchain, a potential disruptor in financial markets, and a truly revolutionary currency.

Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.