To know whether Bitcoin will surpass 70,000 USD, it's essential first to understand that the current crypto market cycle differs from previous ones in several ways. Firstly, the surge this time is mainly driven by speculation around the spot Bitcoin ETF and its subsequent approval, which led to Bitcoin reaching new historical highs. Secondly, the money invested in traditional financial markets by traditional financial institutions and institutional investors has shifted to the crypto market. Moreover, the impact of crypto whales and retail investors on the market is significant, with the current market yet to see massive participation by retail investors. This has led some crypto whales to invest in Bitcoin rather than in altcoins, thereby continuously propelling Bitcoin's rise. Lastly, various factors such as global interest rates, real inflation rates, and geopolitical conflicts might impact the market, potentially making this crypto market cycle distinct from previous ones.
Institutional Investors' Market Entry and Its Impact
Institutional investors may have been previously unable to invest in cryptocurrencies due to regulatory restrictions, but these limitations were lifted when the U.S. Securities and Exchange Commission (SEC) approved all pending spot Bitcoin ETF applications. This means that now, traditional financial institutions and institutional investors can enter the cryptocurrency market through spot Bitcoin ETFs. Additionally, some institutional investors have begun offering spot Bitcoin ETFs to their clients, meaning that when someone purchases a spot Bitcoin ETF, they are effectively buying Bitcoin, thereby driving up the price of Bitcoin.
This shift could change market volatility, as the entry of traditional financial institutions and institutional investors into the crypto market could lead to greater market movements. Their injection of capital will increase market liquidity and could potentially push the market to new highs. At the same time, their participation could also bring more market stability, as they typically bring more stable and long-term investment strategies. These institutions usually follow strict risk management procedures and seek to achieve stable returns over the long term. Hence, the shift of traditional financial institutions and institutional investors could have a profound impact on the volatility and future development of the crypto market.
Apart from the spot Bitcoin ETF, other ways for traditional financial institutions and institutional investors to enter the crypto market include:
Cryptocurrency Funds: Some cryptocurrency funds offer institutional investors a channel to enter the cryptocurrency market, allowing them to indirectly participate in the cryptocurrency market by investing in these funds.
Cryptocurrency trading products registered with mainstream exchanges: As the cryptocurrency market develops, some mainstream exchanges have begun offering cryptocurrency trading products, such as Bitcoin futures, enabling traditional financial institutions and institutional investors to participate in the cryptocurrency market through these products.
Cryptocurrency Trusts and Products: Some institutions can indirectly participate in the cryptocurrency market by investing in cryptocurrency trusts and other related products. These trusts and products are usually managed by a professional team, making it easier for institutional investors to participate.
These are other ways for traditional financial institutions and institutional investors to enter the cryptocurrency market, allowing them to participate in this rapidly developing market.
High inflation indirectly affects Bitcoin prices
Over the past year, interest rates have been at their highest levels in years around the world, and the actual inflation rate is much higher than the officially reported figures, impacting the market. The Federal Reserve System in the United States increased the money supply by approximately 40% between 2020 and 2022, which largely drove the market up. This means that the real inflation-adjusted prices of most assets, including Bitcoin, could be 40% lower than the prices we see on our screens.
However, there are also challenges and uncertainties, such as the influence of cryptocurrency whales on the market, and the unpredictability of the behavior of new retail investors. Considering these factors, the price of Bitcoin may continue to rise, but there are also risks and variables. Therefore, investors should closely monitor market trends and carefully consider their investment strategies.
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