Bitcoin's Surge Past $60,000: Rally or Short-Lived Surge?

Bitcoin has crossed the $60,000 mark for the first time since November 2021.

Is this a sign of a rally or just a surge that will end up in a plunge?

What is behind this growth?

Let’s have a look at the recent events in the crypto market, and see what insights we can glean from them about Bitcoin’s recent performance.

Spot Bitcoin ETFs Approval - the Naked Emperor’s New Clothes or a New Development Stage?

The SEC finally approved 11 spot BTC ETFs. While some sources claim it may be the naked emperor’s new clothes, others insist that it is a significant milestone in the cryptocurrency development as it means an official acceptance of Bitcoin by the US regulators.

Let’s see what it means for investors, traders, and the community.

For investors, it is a move worth attention. It opens a way for institutional investors to access the vast crypto market at a new level.

After the BTC ETF approval, the inflow of funds to BTC ETF increased exponentially and reached over $2 bln per week which is a record value since BTC was introduced by Satoshi Nakamoto. BlakRock’s IBIT, Fidelity’s FBTC, Ark Invest’s ARKB, and other 7 major financial institutions are leading the list.

The cumulative spot BTC ETF volume has increased by billions of dollars since the acceptance of BTC ETF.

These numbers speak for themselves: institutional investors want to benefit from the new market, and this interest means that they will support Bitcoin's growth. It, in turn, is a good sign for all BTC holders.

Bitcoin Halving - One of the Most Anticipated Events in the Crypto World

April this year will be marked by one of the most important events in the history of Bitcoin - a Bitcoin halving. A halving is coded in the Bitcoin blockchain and occurs every four years, whenever 210,000 blocks are mined. This event marks the reduction of miners’ rewards by half

The first halving took place in 2012, and the mining rewards were reduced from 50 BTC to 25 BTC.

The next halving occurred in 2016, with the rewards reduction to 12,5 BTC.

The most recent halving occurred in 2020 when the rewards were cut to 6.25 BTC.

If you have a look at the table, each halving event used to cause an increase in the BTC value.

Why so?

Think about the Proof-of-Work. To mine a block, one needs expensive equipment and a lot of energy. It all costs - time and money. This is why miners would work only if their expenses and efforts are compensated with rewards.

Now, all of a sudden, mining rewards will be reduced by half. It means that after that, confirming new blocks will become unprofitable as miners may be spending more on mining than earning. This is why they will slow down their mining activities. Fewer new coins will be produced, and due to the increased scarcity, the Bitcoin price will start growing. At some point, it will increase to a level when even half of the previous reward would cover all the miners’ expenses, and mining activities will return to normal.

In short, it means that while Bitcoin is used, its price will be growing after each halving event. Considering that now, leading financial institutions are involved in the BTC market through ETFs, Bitcoin will be used.

As we can see, combined, these events have led to a rally that is going to continue. For how long? And are there any possibilities that this time, it won’t work?

Any Reasons to Fail?

Many experts believe that the introduction of spot BTC ETF is not as good as it was claimed to be. With the arrival of major institutional investors to the market, the majority of BTC coins may end up concentrated in the hands of these investors thus leaving ordinary users out.

Another concern is that ETF could put the BTC market under enormous pressure thus exacerbating the BTC volatility.

Finally, the last concern is that over time, the risk of decoupling the ETF price from the underlying asset arises. The trading history knows the cases when it happened, and considering the BTC volatility, the same can happen with Bitcoin which, in turn, poses a risk to the market stability.

Bottom Line

Considering the recent and the coming events in the crypto market, the rally will continue. Even though there are some risks in the spot BTC ETF introduction, those risks cannot be compared to the benefits that this event delivered to the industry. The coming halving also will contribute to the continuing growth of the main cryptocurrency, like it was before.

Will Bitcoin price fall eventually? Considering that the crypto market, like any other market, has its cycles, the rally will continue until the next crypto winter starts.