Bitcoin has been on a remarkable upward trajectory over the weekend, smashing through a peak of $98,300 after finding essential support at $91,405. The largest cryptocurrency by market capitalization has experienced a continuous rise over the last six days, driven by strong demand and shifting supply dynamics.
On the supply front, we are witnessing unprecedented levels of mining difficulty and hash rates, reaching historical highs since the last halving event in April. This climb has notably reduced Bitcoin’s inflation rate to 1.11%, significantly lower than the current 2.7% consumer price index in the U.S. Moreover, this figure is a remarkable decrease compared to 12% seen in 2016, with the amount of Bitcoin available on exchanges continuing to dwindle.
On the demand side, the inflow of funds into Bitcoin Exchange-Traded Funds (ETFs) is noteworthy. Recent reports indicate that ETFs have amassed over $128 billion in assets, with BlackRock’s IBIT leading the charge at over $54 billion. MicroStrategy has also ramped up its acquisitions, now possessing over 450 Bitcoins, and is projected to exceed 500,000 coins by March.
Interestingly, the Coinbase Premium Index—a key metric for measuring American investor activity—has recovered from a significant drop in December. The index has risen to -0.021, up from -0.24, providing a hint that large U.S. investors might be accumulating Bitcoin. Additionally, per data from CryptoQuant, this index has crossed above the 14-day Simple Moving Average after a month of stagnation, suggesting a favorable outlook for Bitcoin prices.
However, with prices surging, analysts remain cautious. Jacob King from WhaleWire recently issued a stark warning about the potential for a crypto bear market. His concerns stem from decreasing purchasing activity from MicroStrategy, possible shifts in El Salvador’s crypto policies, and significant Bitcoin sell-offs by institutional players like BlackRock. King warned that these trends could signify troubling times ahead for Bitcoin investors, given that Tether has not minted any new currency for over 20 days, further contributing to BTC’s stagnation.
Despite the bullish indicators, traders need to be vigilant. Bitcoin is currently trading just under $98,035 and faces both positive and negative pressures. The continual rise above the pivotal $91,400 support could signal a stronger bullish trend, pushing towards an all-time high target around $108,000. Nonetheless, if it breaches this support level, we could witness a concerning bearish trend.
