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Bitcoin has made history by breaking past the $100,000 barrier for the first time, reaching a peak of $104,088 late Wednesday in New York. The cryptocurrency experienced a brief dip to $94,587 earlier that day before staging an impressive recovery. Several pivotal factors have been instrumental in this unprecedented rise:
Federal Reserve Chair Powell Compares Bitcoin to Gold
In a notable acknowledgment from the traditional financial world, Jerome Powell, Chair of the Federal Reserve, touched upon Bitcoin at the New York Times DealBook Summit. When asked about Bitcoin’s representation as a symbol of faith or lack thereof in the US dollar and the Federal Reserve, Powell provided a nuanced response.
“I don’t think that’s how people think about it,” Powell commented. “People use Bitcoin as a speculative asset, right? It’s like gold. It’s just like gold, only it’s virtual. It’s digital. People are not using it as a form of payment or as a store of value. It’s highly volatile. It’s not a competitor for the dollar; it’s really a competitor for gold.”
This comparison to gold, a traditional store of value, likely further cemented Bitcoin’s legitimacy within the financial ecosystem.
Financial experts have noted that as central banks hold gold, rejecting digital alternatives like Bitcoin might prove shortsighted. History has shown that betting against digitalization has not favored traditional businesses such as Kodak or Blockbuster.
Russia’s Putin Expresses Openness to Bitcoin
Adding to Bitcoin’s momentum, Russian President Vladimir Putin made remarks during the Russia Calling forum that were widely interpreted as supportive of Bitcoin.
“Who can ban Bitcoin? Nobody,” Putin asserted. “And who can prohibit the use of other electronic means of payment? Nobody. Because these are new technologies. And no matter what happens to the dollar, these tools will develop one way or another because everyone will strive to reduce costs and increase reliability.”
Putin’s comments come amidst speculation about an impending “Bitcoin Space Race” among global superpowers. President-elect Donald Trump, during his campaign and at the Bitcoin 2024 conference in Nashville, promised to establish a Strategic Bitcoin Reserve in the United States. He suggested that Bitcoin could play a role in addressing the national debt.
David Bailey, CEO of BTC Inc and advisor to Trump’s team, emphasized the urgency of this initiative, calling for the establishment of the Strategic Bitcoin Reserve within the first 100 days of the new administration.
Strong Spot Demand and Institutional Interest
The surge in Bitcoin’s value was bolstered by strong spot market activity and substantial institutional interest. Open interest in Bitcoin futures spiked by over $4 billion, according to Coinalyze data, with funding rates reaching new highs.
This rally was primarily driven by spot markets rather than derivative speculation, showcasing a healthy and sustained demand. The notorious “Great Sell Wall” at $100,000, a previous barrier to upward movement, was decisively overcome on the second attempt.
Market analysts speculate that significant figures, such as Michael Saylor, may have contributed to the buying pressure. MARA Holdings, Inc., the largest publicly traded Bitcoin mining company, recently raised $850 million, potentially using these funds to acquire more Bitcoin during the rally.
CryptoQuant reported that institutional demand was a key driver, highlighting the sustained buying pressure from US investors as indicated by the Coinbase Premium Index.
Retail Market in Disbelief
Despite the bullish trend, retail traders seem to be in disbelief. On-chain analytics firm Santiment observed that while whale accumulation remains robust, retail sentiment is cautious.
Santiment noted, “With whale accumulation continuing to look strong, the only factor holding back $100K BTC history being made is retail traders’ excitement.” The firm pointed out increasing skepticism and expectations of a price correction following November’s gains. However, current social media trends reflect “hesitance and uncertainty from traders,” with a negative-to-positive comment ratio.
Santiment added, “With numerous indications over the years that crypto markets move the opposite direction of the crowd’s expectations, we should feel encouraged by our fellow traders’ FUD and high profit-taking.” They suggested that while there might be a battle between bulls and bears, the milestone could be achieved soon if key stakeholders continue accumulating Bitcoin.
