What’s driving the surge in Bitcoin?
Digital currencies are once again in the news as Bitcoin hits levels not seen since the end of 2021 when it was reeling from a record high close to $69,000. What’s fuelling the rise and can it make a new record high?
IGTV caught up with Nick Cawley, senior strategist at Daily FX about the drivers behind the climb. Can it reach a new record, and also how to approach the business of getting exposure?
(AI Video Summary)
Bitcoin price surges due to high demand
Bitcoin and other cryptocurrencies have become extremely popular recently, with Bitcoin reaching price levels that haven't been seen since November 2021. An expert at Daily FX, Nick Cawley, explains that this surge in price is due to a high demand for Bitcoin. This demand has been driven by the approval of 11 spot Bitcoin ETFs by the SEC. These ETF providers have been buying a lot of Bitcoin, causing a mismatch between the supply and demand. As a result, sellers are demanding higher prices.
Impact of Bitcoin halving event
Another factor that is expected to increase the demand for Bitcoin is the upcoming Bitcoin halving event. This event happens every four years and reduces the mining rewards for Bitcoin. This means that there will be less Bitcoin being produced, which could increase its value even more.
Bitcoin has been experiencing a one-way market, where every seller is quickly finding a buyer, leading to an increase in prices. Cawley believes that there is a chance for Bitcoin to reach a new all-time high before the halving event in mid-April. However, he also acknowledges that cryptocurrencies are extremely volatile and there is a possibility of a 5-10% decrease in prices.
When trading cryptocurrencies, it's important to manage your risks effectively, especially if you're using leverage. Even small price movements can have a big impact on your profits or losses. It's also worth mentioning that holding Bitcoin directly is less affected by price movements compared to leveraged positions.
Alternative crypto investment options
Cawley also talks about alternative investment options for those who can't trade Bitcoin directly. Coinbase, one of the biggest cryptocurrency exchanges, benefits from the increased activity in Bitcoin and other cryptocurrencies. MicroStrategy, led by Michael Saylor, holds a significant amount of Bitcoin, so its share price is closely tied to Bitcoin's price.
Overall, the current Bitcoin market is heavily driven by the demand from ETF providers and the anticipation of the upcoming halving event. There is a possibility of reaching a new all-time high, but it's important to be cautious due to the volatility of cryptocurrencies. If you're unable to trade Bitcoin directly, you can consider investing in alternatives like Coinbase or MicroStrategy.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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