- Institutional investments to increase the demand for BTC.
- ETFs emerging as a strong frontier for renewed price push.
Bitcoin affirmed its dedication to staying in the $50,000 territory, crossing the barrier on Wednesday to trade at $51,525 at the time of this writing. The price represented an increase of about 6% within 24 hours and gains of about 5% over the past week.
The renewed attempts to float above $50,000 comes against the backdrop of a tumultuous 12-day period during which the cryptocurrency came within a touching distance of $60,000 but slid back to lows of $43,000.
Despite the stormy end to February for Bitcoin, the month was also among the most successful periods in its history. Bitcoin prices reached historical highs and increased by about 36% in February to wrap up a five-month price rise streak.
Is the market correction over?
Wednesday’s gains presented a relief to most investors after a 21% drop in prices witnessed last week. The market correction mirrors the drop witnessed about a year ago, in the period leading to widespread coronavirus lockdowns. However, the correction seems to have slowed down following some favorable market conditions.
Two days ago, China’s Inner Mongolia announced a ban on cryptocurrency mining in a bid to reduce energy consumption. Inner Mongolia has been a leader in the region’s cryptocurrency mining, thanks to its cheaper power. To put that into perspective, the region alone accounts for about 8% of the total Bitcoin mined globally, with the larger China accounting for 65%. Therefore, the ban means that the amount of Bitcoin mined will likely reduce, thereby reducing the BTC in circulation. In essence, that would mean reduced supply, leading to higher prices.
The global cryptocurrency market this week got a valuable endorsement from Goldman Sachs and Citigroup. The two investment banks, while not announcing direct investment in Bitcoin, forecast that cryptocurrencies would soon form a core component of international trade.
The statements are a pointer to the possibility of the two major investment banks diversifying significant portions of their portfolio to cryptocurrencies. Bitcoin, in particular, was pointed out by Citigroup’s Global Perspectives and Solutions as potentially the future currency of choice for international trade. Also, Goldman Sachs already announced plans to roll out Bitcoin futures within the next two weeks.
Elsewhere, Fidelity Investments indicated its intention to expand its Bitcoin holdings in the near future. In its February research note, the firm had a bullish perspective of Bitcoin, even going as far as stating that BTC is poised to take more market share from gold as a hedge against inflation. Such assessments from trusted investment hegemons are likely to increase demand for Bitcoin and will drive BTC prices further up.
BTC return on investment pulling more investors
MicroStrategy kept up its appetite for Bitcoin, adding 328 BTC worth $15 million to its inventory on Monday. The firm’s positive approach to Bitcoin has seen its stock grow by over 130% in the past three months. The unparalleled successes by investment firms such as MicroStrategy attributable to cryptocurrencies will be driving more investment firms to Bitcoin.
In the meantime, Bitcoin Exchange Traded Funds (ETFs) are fast emerging as the new frontier for attracting more investment in BTC. About a week since launching the world’s first Bitcoin ETF, Purpose Investments has nearly $600 million worth of assets. CBOE Global Markets Inc. has also launched an attempt to get approval by the Securities and Exchange Commission to launch the first US-listed Bitcoin ETF.
Technical outlook
Bitcoin has broken past the $50,000 psychological barrier and will find the first support level at $49,184 and the second support level at $50,545. The prevailing favorable environment will push prices up to the first resistance level at $51,624, beyond which BTC/USD could rise to $54,000. However, unsuitable market forces with the price at $49,184 may drive prices down to $46,989.
