The secret behind Bitcoin's surge: analyzing the reasons for the recent surge

In recent years, as an emerging digital asset, the price fluctuation of Bitcoin has always attracted much attention. In particular, in recent times, the price of Bitcoin has risen sharply, which has triggered extensive discussions and research. Let's take a deeper look at the reasons behind the surge in Bitcoin prices.

First of all, changes in the global economic environment are one of the important factors affecting the price of Bitcoin. In recent years, especially after the epidemic, the pace of economic recovery in various countries has varied, and central banks in many countries have adopted loose monetary policies. In this case, liquidity is abundant in the market, and investors' risk appetite has risen accordingly. As an alternative investment asset, Bitcoin has gradually attracted more and more capital inflows. For example, in some countries, inflationary pressures have prompted investors to look for assets that preserve value, and Bitcoin is regarded as "digital gold" and has become a safe haven option.

In addition, technological progress and market maturity also provide strong support for the rise of Bitcoin. With the continuous development of blockchain technology, the transaction efficiency and security of Bitcoin have been significantly improved. Nowadays, many trading platforms provide more convenient trading methods, making it easier for investors to buy and sell Bitcoin. At the same time, with the continuous development of the Bitcoin market, related financial products such as futures and ETFs have also been launched one after another, which further enhances the attractiveness of the market and drives up the price of Bitcoin.

It is worth noting that changes in market sentiment also have a direct impact on Bitcoin prices. The popularity of social media has greatly accelerated the speed of information dissemination, and investors' emotions and expectations can quickly affect the market to a certain extent. For example, when a well-known investor or public figure expresses his views on Bitcoin on social media, it often triggers a wave of follow-up effects, causing investors to flock in and further push up prices. This phenomenon reflects the irrationality of the market to a certain extent, but it is also this sentiment that drives Bitcoin's price fluctuations.

After analyzing the above factors, we also need to pay attention to the impact of policy changes on Bitcoin. Recently, some countries have begun to adjust their regulatory policies on cryptocurrencies, and some countries have even announced the legalization of Bitcoin. This policy change undoubtedly provides a guarantee for the legitimacy of Bitcoin and enhances investor confidence. For example, a certain government launched a cryptocurrency regulatory framework in early 2023, aiming to protect investors while promoting the healthy development of the crypto market. The introduction of this policy not only improves market transparency, but also attracts more investors to enter the market.

Of course, the rise in Bitcoin prices is not without risks. Market volatility is still a factor that cannot be ignored. Although Bitcoin has performed well in the short term, in the long run, its price is still subject to a variety of factors. For example, the security of technology, market regulatory policies, and changes in the global economic situation will all have an impact on the price of Bitcoin. Therefore, when investing in Bitcoin, investors still need to remain rational and carefully assess risks.

In my personal investment experience, I have also deeply realized that Bitcoin investment has both charm and risks. When I first entered the market, I was full of expectations for the future of Bitcoin. However, with the fluctuations in the market, I also experienced several ups and downs. This made me realize that investment is not only an analysis of the market, but also a test of one's own psychological endurance. In this process, I gradually learned how to control my emotions, formulate reasonable investment strategies, and stay calm and rational.

In short, the rise in Bitcoin prices is the result of the combined effect of multiple factors. From the global economic environment to the participation of institutional investors, from technological progress to changes in market sentiment, to policy adjustments, all these factors affect Bitcoin prices to varying degrees. As an emerging investment asset, Bitcoin undoubtedly provides investors with new opportunities, but it also comes with corresponding risks. I hope that in future investments, everyone can remain rational and give full play to their own judgment to cope with market changes and challenges.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

Bitcoin, which has been dormant for a long time, has recently been like a "wild horse running wild", with its price soaring all the way. According to market data, although the highest price of Bitcoin in history is still recorded as $20,089 on December 17, 2017, as of December 2, the price of many trading platforms has reached a record high. Therefore, many investors are curious about the reasons for the recent surge in Bitcoin. So, what is the reason for the recent surge in Bitcoin? The following editor of Coin Circle will give you an in-depth analysis of the reasons for the recent surge in Bitcoin.
 What is the reason for the recent surge in Bitcoin prices?
There are many reasons for the rise in Bitcoin prices. Investments from large institutions such as MicroStrategy have led the trend, and large companies like Grayscale also custody Bitcoin for their own customers. What's more, it is now easier to buy Bitcoin since PayPal began allowing people to buy and sell Bitcoin.
The price of Bitcoin has been surging in recent months.
Bitcoin’s inflation levels also fell by half, which also played a role in Bitcoin’s price increase. These individual factors combined to spawn Bitcoin’s impressive bull run in the second half of 2020. But it all started with MicroStrategy.
1. The MicroStrategy Effect
From August to September this year, business intelligence company and international giant MicroStrategy invested $425 million in Bitcoin.
Following MicroStrategy's investment, Square invested $50 million in Bitcoin on October 8, 2020, accounting for 1% of the company's total assets.
Since those investments, MicroStrategy and Square have made handsome profits of 46% and 53%, respectively, with the two companies’ Bitcoin currently valued at $620 million and $76 million, respectively.
In recent months, these well-known figures have also become some of Bitcoin’s most outspoken evangelists.
MicroStrategy CEO Michael
Saylor has been vocal in public about bitcoin. When his firm first announced its investment, Saylor called bitcoin "digital gold," a cryptocurrency he said was "harder, stronger, faster, and smarter than anything that came before it."
Similarly, Amrita
Ahuja (formerly Square’s CFO) said of investing in Bitcoin, “We believe Bitcoin has the potential to become a more ubiquitous currency in the future,” adding, “This investment is a step on that journey for a company building products based on a more inclusive future.”
These investments, and the moment of high public praise for Bitcoin, seem to have started with MicroStrategy’s first investment, so Jason, a Bitcoin analyst at Quantum Economics,
Deane called it the “MicroStrategy effect.” Deane added that the moves “triggered an institutional scramble to get as much Bitcoin as possible.”
Top public companies and their Bitcoin holdings
The statements were accompanied by public support for Bitcoin elsewhere in the investment community.
2. Public support for Bitcoin investment
Bitcoin’s positive run in the second half of 2020 has seen some major institutional adoption of the cryptocurrency.
JPMorgan Chase is one of the biggest examples. In 2017, JPMorgan Chase CEO Jamie
Dimon has called Bitcoin a "fraud." In October, the investment bank said Bitcoin is competing strongly with gold and that "the long-term potential gains for Bitcoin are considerable."
Paul Tudor Jones, a giant in the hedge fund industry, likened buying Bitcoin to investing in technology early on. Jones was on CNBC’s Squawk Box (its partner show CNBC’s Fast
Money is particularly bullish, saying, “Bitcoin has a lot of the hallmarks of being an early investor in a technology company, which unfortunately I didn’t realize until I came on your show and was watched by God knows how many different people.”
In addition, billionaire investor Stanley, who once disdained Bitcoin,
Druckenmiller said the famous cryptocurrency might just be a better bet than gold. “I hold many, many times more gold than I hold Bitcoin, but frankly, if gold collateralization works, Bitcoin collateralization might be better,” Druckenmiller said this month.
Although Keith, CEO of risk management firm Hedgeye,
McCullough turned bearish on Bitcoin on October 6, but he later revealed that he actually bought it back on October 12. This means that he actually benefited from the $11,500 Bitcoin wave (unless he later sold his Bitcoin).
McCullough added that he has a significant amount of money invested in MicroStrategy stock, which is heavily invested in Bitcoin. So, in a way, he has invested in cryptocurrency twice.
As McCullough and other investors tout the virtues of Bitcoin, many institutional investors are following suit.
3. Grayscale and Bitcoin Custody
Asset manager Grayscale Investments is at the forefront of offering custodial services to wealthy bitcoin investors.
Last week, the media reported how Grayscale had secured over 40,000 Bitcoins for its customers (worth over $600 million at the time of writing). However, Grayscale is not the only player.
Grayscale and Square's mobile payment service CashApp acquired a total of 85,000 bitcoins, worth about $695 million. In the same period (i.e., the first quarter of 2020), a total of 163,800 bitcoins were mined, which means that the two companies' combined purchases of bitcoins are equivalent to about half of the total amount of bitcoin mined in the quarter.
Similarly, Fidelity Digital Assets, which provides custody services to investors, has also shown its commitment to the industry. On November 24, Christine, head of sales and marketing at Fidelity Digital Assets,
Sandler said institutional investors are heavily promoting Bitcoin and other cryptocurrencies.
Christine
“We did see in 2020 a broader adoption of the ‘digital gold’ narrative, and it started to resonate with other aspects of institutional investors, namely hedge funds. Then ultra-high net worth individuals and family offices,” Sandler said, adding, “We saw an expansion in the types of clients that were engaging with the ecosystem.”
The data has raised concerns that demand for bitcoin is about to outstrip supply, as such large quantities of the cryptocurrency are being snapped up by wealthy investors and big companies rather than ordinary people.
4. Bitcoin halving: supply compression
The Bitcoin halving may have had an impact on the price of Bitcoin. The Bitcoin halving occurs every four years and reduces the number of Bitcoins miners receive for adding new blocks to the Bitcoin blockchain by half. Therefore, starting in May, the output of Bitcoin is only half of that in previous months.
Elias, a researcher at the Blockchain Research Lab
Strehle told the media, "With the halving of the number of bitcoins in May, this supply is halved, which means that miners have fewer bitcoins to sell. This could lead to a shortage of supply and thus a rise in the price of bitcoin."
Bitcoin halving will have an impact on mining and Bitcoin's price
This is basic economics, not just limited to Bitcoin mining, or the cryptocurrency industry as a whole. If demand remains the same, but supply decreases, this puts upward pressure on prices.
Ingo, co-founder of Blockchain Research Lab
Fiedler told the media, "Think about apples. If the harvest is particularly good this year, then the price of apples will fall. However, if apples are scarce due to a poor harvest, then the price of apples will rise." It is possible that PayPal purchased a large number of Bitcoins that are being mined, further compressing the supply of Bitcoin. The company's reasoning suggests that PayPal may purchase 70% of newly mined Bitcoins. This is on top of the large amount of data obtained by Grayscale and Square.
All of these reasons have had a positive impact on Bitcoin’s price over the past few months, but there is still one factor that stands out (best suited to driving Bitcoin mass adoption).
5. PayPal and Cryptocurrency
International payment giant PayPal announced in October that it would launch a cryptocurrency trading function on its platform. Yesterday, the company confirmed that all customers can now use Bitcoin and plan to introduce this function to Venmo.
The launch includes the ability to trade four cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.
With financial industry giants such as MicroStrategy, Square and Grayscale
All of them view Bitcoin as a legitimate asset. Therefore, the emergence of PayPal offers the greatest hope for Bitcoin to become mainstream.
"Just bought bitcoin on Paypal, it was super easy. This is how bitcoin goes mainstream," said the anonymous Twitter user BitcoinBF.
PayPal will also enable its users to use cryptocurrencies with any merchant that accepts PayPal. On November 23, PayPal CEO Dan
“Early next year, we will allow cryptocurrencies to be used as a source of funding for transactions at 28 million merchants,” Schulman said.
PayPal once questioned Bitcoin’s suitability as a currency, but now, it’s just one of many big companies jumping on the Bitcoin bandwagon. When it’s jumping in line with everyone else, it’s no wonder Bitcoin’s price has been on fire.
 What factors determine Bitcoin price?
1. Supply and demand
The concept of supply and demand is one of the fundamental laws of economics. Simply put, the rarer something is, the more it is in demand and the higher its price.
Bitcoin’s protocol predetermines that there will be 21 million coins in circulation. There are now fewer than 4 million bitcoins left to be mined, and as the cryptocurrency space grows in popularity, scarcity appears to be having an impact on price.
As we all know, Bitcoin will usher in its third halving in May 2020. Judging from the historical price trend, prices tend to soar 3 months to 1 year before the block halving.
2. Regulatory issues
As Bitcoin becomes popular around the world, regulators in various countries are also racking their brains and studying how to deal with this new species. They must figure out several issues surrounding Bitcoin, such as how a country's tax system treats this new currency, whether and how to regulate cryptocurrencies, etc. Although many people believe that legislation is not good for the crypto field, the opposite is true. Although Bitcoin has been around for nearly a decade, it became famous in 2017 due to a sharp increase in prices. In other words, in the eyes of ordinary people, this is a relatively new field.
For example, recently, there are still many discussions about Libra. In fact, things have come to this point.
In the short term, it will be rejected by the regulators, and Facebook does not have the courage to go against the regulators. After all, it is a big company and there is no need to put itself at great risk for such a business. On the other hand, the New York Attorney General will give Tether a result at the end of July, and the Fed’s tightening policy will continue to affect the flow of global funds. Especially the direction of the US stock market, which is still at a high level. But we should note that even if a large amount of funds flow out of the US stock market, whether these funds will flow into the digital currency market still needs to be observed. We believe that whether the outflow of funds can enter the digital currency market depends on how the mainstream market views digital currency.
As we all know, a new industry is bound to have flaws when it is just starting out. With the advent of a series of mainstream currencies such as BTC, fake air coins have been issued without restraint, under the name of blockchain, outside of financial supervision, and some have been maliciously hyped and even suspected of illegal fundraising, which has had an unignorable impact on society and value investors. The country has begun to formulate policies and regulations, and has reported extensively on the bad phenomena of blockchain projects, which has constrained investors' enthusiasm and is also the main factor affecting the price of coins.
3. Community Concept
The community is an important foundation for the consensus mechanism of blockchain technology. The unification of community development concepts is crucial to the stable development of blockchain projects and application development. Taking BTC, BCH and BSV as an example, at the beginning, there were differences in the development concepts of the BTC community, which led to the division of the community and the formation of the BCH community.
The community formed a BTC "conservative" group represented by the Core team and a BCH "innovative group" group that believed that Bitcoin could improve TPS by increasing the block size, achieve more applications through the layered design of the main chain, and increase effective users by expanding application scenarios. The community split, causing the price of the currency to plummet. Later, the BCH community also had ideological differences in its development, which also led to the split of the community into the BCH community and the BSV community. For a time, the price of the currency plummeted, and there was widespread grief and misery.
Through the above introduction, I believe everyone has some understanding of the reason for the recent surge in Bitcoin. Before investors conduct digital currency transactions, even if they do not choose Bitcoin, they must choose a good digital currency to invest in. Investors can check the white paper of the digital currency, because from the white paper you can see the currency's issuance mechanism, application scenarios, total issuance, equity distribution, future planning, founder information, core team and other information. So if investors see that the white paper is vague about some application scenarios and core team information, then there is a high probability that the project will run away.

In addition, the participation of institutional investors is also an important factor driving the rise in Bitcoin prices. More and more institutional investors are beginning to pay attention to Bitcoin and include it in their investment portfolios. For example, a well-known hedge fund announced in early 2023 that it would regard Bitcoin as a core asset and planned to gradually increase its holdings over the next five years. This move not only boosted market confidence, but also attracted more retail investors to follow up, forming a virtuous circle. The participation of institutional investors has further enhanced the liquidity of Bitcoin, and its price has therefore been supported.