Bitcoin Smashes $50,000 Barrier Powered by ETFs, Fed Rate Cuts, and Anticipation of Halving

Bitcoin reached a milestone on Monday, surpassing $50,000 for the first time since December 2021. This recent development indicates a growing confidence in the digital currency, following a tumultuous period of scandals and bankruptcies over the past two years.

According to Christopher Newhouse, a DeFi analyst at Cumberland Labs, the current conditions are highly favorable for digital assets.

Inflows into exchange-traded funds, speculation of future monetary easing, and the upcoming halving are all contributing to these positive trends.

Bitcoin (BTC), having faced a tumultuous 2022 with a 64% plunge, hitting lows at $16,000, is now showing signs of resilience and growth. 

Over the past 12 months, BTC has experienced an approximate 129% increase, though it still lingers below the all-time high of nearly $69,000 achieved in November 2021.

The recent approval of 10 spot Bitcoin ETFs by the Securities and Exchange Commission on January 11 marked a significant development in bridging traditional finance with digital assets. 

Institutions such as BlackRock and Fidelity launching crypto funds have been regarded as a watershed moment for the cryptocurrency market.

However, contrary to expectations that the SEC approval would spark a bull market, BTC initially displayed volatility. This can be attributed to substantial outflows, exceeding $6 billion, from the Grayscale Bitcoin Trust (GBTC), a decade-old closed-end trust. 

The GBTC exodus, unlocking previously committed investors, contributed to a 15% BTC price decline to $39,505.

Yet, signs of recovery are evident as outflows from GBTC are slowing down. Daily outflows, averaging $500 million in the initial weeks, have steadily decreased since January 26.

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Bitcoin Outflows Hit 2022 Low

Bitcoin reached a milestone on Monday, surpassing $50,000 for the first time since December 2021.

Recent data from Bloomberg reveals that Friday’s outflows reached a low of $51.8 million, the smallest figure since the SEC approvals.

Simultaneously, inflows into the other nine ETFs have been gaining momentum. The cumulative net inflow for the last week amounted to approximately $1.2 billion, nearly half of the total inflows so far.

Matteo Greco, a research analyst at Fineqia International, attributes the recent growth to strong buying pressure facilitated by ETF inflows. 

Geoff Kendrick, Standard Chartered’s head of digital assets research, predicts daily BTC price increases if the current pace of ETF inflows, averaging around $1 billion per week, continues.

Additionally, the Federal Reserve’s indication of impending interest rate cuts in the spring is seen as a positive factor for Bitcoin prices. 

Markus Thielen of 10x Research notes that during periods of lower interest rates, riskier assets like Bitcoin become more attractive.

Dave Nadig, VettaFi’s financial futurist, sees optimism building ahead of April’s halving event, where the financial rewards for miners decrease, leading to a reduction in supply. 

Previous halving events have historically preceded bull markets for Bitcoin, with the upcoming halving expected to contribute to further market growth.

The current market dynamics of Bitcoin, driven by factors such as ETF inflows, interest rate trends, and the anticipation of the halving situation, indicate a positive outlook for the value of the cryptocurrency.

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