In the past few days, Bitcoin (BTC) has become the talk of the town because of its remarkable price increase. Bitcoin has always been subject to volatility, with significant price fluctuations being a regular occurrence (Breaking Down the Bitcoin Boom). But the current rise has taken many by surprise, with the cryptocurrency breaking its 9-month high.
Bitcoin’s journey to becoming a mainstream investment asset has been a long and tumultuous one. In the early days, it was largely considered a niche asset that was only of interest to tech enthusiasts and those who distrusted the traditional banking system. But BTC’s popularity gradually increased as more people became interested in its decentralized nature and its potential to offer an alternative to traditional currencies.
Over the years, Bitcoin has experienced several significant price surges and crashes, but the current surge has been one of the most notable. This surge has led to several speculations on the factors driving Bitcoin’s boom.
In this article, we will break down the factors driving Bitcoin’s unprecedented price increase. In addition, we will also consider whether Bitcoin can break its earlier high in the next few weeks or not.
Breaking Down the Bitcoin Boom: The Surprising Factors Fueling BTC’s Meteoric Rise
In the past two weeks, the price of Bitcoin witnessed a massive surge of more than 26%. This marvelous price increase sparked debate in the crypto community about what’s prompting the BTC prices to skyrocket. Basically, there are two factors driving the price of Bitcoin in recent weeks.
The Aftermath of the US Banking Crisis: How People’s Priorities Have Changed
Given Bitcoin’s history, the bank collapse proximity is obvious: At least three banks have failed, and others are on the verge of falling. Because it’s not due to Bitcoin, this is positive for the price of bitcoin.
Actually, it’s unclear who is to blame for the three bank failures, because no one knows if these institutions are failing due to insolvency.
Certainly, SVB fell as a result of an old-fashioned bank run fueled by clear balance-sheet flaws caused by poor duration risk management. And, yes, Silvergate was having problems and had to take out an FHLB loan, but its eventual closure was apparently voluntary. Then there’s Signature Bank, where even authorities aren’t sure if the bank was shut down due to crypto or a “crisis of trust” in leadership.
After all of that, we do know one thing that isn’t driving these banks to fail. These banks are not in jeopardy as a result of betting on bitcoin, cryptocurrency, or firms in those industries. What appears to be happening is that the fractional reserve banking system is under stress as a result of rising interest rates, and it is exhibiting cracks.
And so the narrative goes: As the banks fail, opt-out & buy Bitcoin (BTC). That narrative is strong enough to boost the price. Apart from that, experts also believe that this banking crisis has ultimately shifted individuals’ focus from the traditional banking system to cryptocurrencies. This indicates that BTC might witness a significant amount of adoption in the near future.
Binance Announce Plans to Convert its Cash Reserves into Crypto
On March 10, the failure of three major crypto-friendly banks triggered the USDC stablecoin to fall from its $1 peg to as low as $0.87.
To that end, Binance co-founder and CEO Changpeng Zhao announced a major development. CZ announced that the exchange will convert the remaining $1 billion funds in its Industry Recovery Initiative to native cryptos, like BTC, BNB & ETH.
For confirmation, CZ then uploaded links to the hash IDs for the BTC and ETH transactions, claiming that $980 million was transferred in 15 seconds with a $1.98 transaction fee. By doing so, CZ aims to build the trust of individuals in the crypto industry, which is much more reliable than the traditional banking sector.
And that’s the reason why leading cryptocurrencies, like BTC, BNB, and ETH, witnessed a price increase in the past week.
The crystal ball of Bitcoin: What’s in store for its price?
On March 20, the price of Bitcoin (BTC) surpassed $28,000 for the first time since June 2022, as strong positive emotion gripped the world’s largest cryptocurrency. As the global banking system starts to fall apart, investors are placing more faith in Bitcoin.
However, Bitcoin has experienced a slight pullback in the last 24 hours, with a market valuation of $536 billion (Breaking Down the Bitcoin Boom). Meanwhile, experts believe that the next move will most likely be determined by the Fed interest rate hike meeting which is scheduled for March 22.
The next Fed action will be crucial in determining how US equities and crypto react. On the one hand, it is combating inflation, while the looming banking crisis has prompted it to inject another $300 billion into the economy. This has effectively reversed all of the Fed’s recent monetary tightening measures.
In just a few hours, the FOMC meeting will reveal whether the Fed has finally decided to pivot and return to money printing. This also indicates that the meeting will undoubtedly establish a new trend for the BTC price movement.
Conclusion
Bitcoin’s exceptional price growth has piqued the interest of both investors and market analysts. While the factors driving this boom are diverse, it is evident that macroeconomic conditions and growing adoption have all played important roles in driving up Bitcoin demand.
Considering this surge, it is vital to remember that Bitcoin’s price is still highly volatile and vulnerable to sharp price drops. As a result, investors should proceed with caution and invest only what they can afford to lose.
To know more about Breaking Down the Bitcoin Boom, go check out SunCrypto Academy.
Disclaimer: Every user should do their own market research before investing in cryptocurrency as market trends keep happening and volatility is a major thing in this industry. Never follow a piece of advice available on the internet, always DYOR.
