Why is Bitcoin rising, will the rally hold, and altcoins follow suit?
Bitcoin, the poster child of decentralised digital currency, after a lull period has picked up great steam in the last couple of weeks and finally hit an all-time high of $72,710.68 on March 11. A perfect storm of Bitcoin ETF approval luring in institutional investor interest and upcoming Bitcoin halving event resulting in improved market sentiment is driving the rise and rise story.
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While the sustainability of this momentum is still uncertain, in the near term, altcoins are expected to ride on Bitcoin’s glory. The token since hitting ATH has marginally corrected and is currently trading at $71,870.56. Since the approval of spot bitcoin ETF – exchange-traded funds that track the value of Bitcoin and trade on traditional market exchanges – significant institutional interest has been piqued, contributing to the token’s surge.
Parth Chaturvedi, Investments Lead, CoinSwitch Ventures explains, “The current crypto market rally has taken even the most optimistic crypto supporters by surprise, as the price is being driven by the massive institutional interest, in the form of strong inflows into the recently launched Spot Bitcoin ETFs in the US.”
In just over two months of going live, Blackrock’s IBIT and Fidelity’s FBTC have already accumulated more than $12 billion and $7.5 billion in AUM. Even though most experts were predicting such flows for the entire year of 2024, the speed of accumulation and subsequent price rise were unexpected, he adds.
“Investors are looking at this as a move towards greater credibility for the asset. There is greater liquidity in the market with Tether’s $2 billion dollar USDT freshly infused, indicating the increased demand for Bitcoin among ETFs. The ecosystem is bracing itself for new highs and trying to enter the market for better gains,” notes Rajagopal Menon, Vice President, WazirX.
Further, the upcoming Bitcoin halving event has turned the market sentiment up. Halving essentially occurs approximately every four years, reducing the reward for miners by 50 per cent for validating transactions. This event decreases the rate of new Bitcoin creation, potentially leading to price increases due to limited supply and strong demand.
Historically, Bitcoin halvings have resulted in driving BTC prices to new ATHs in the preceding year. After the first halving price rose from $13 to $1,152 within a year, second halving took price up from $664 to 17,760 in over a year, and third halving took price from $9,734 to $67,549 within 1.5 years.
“Around the estimated halving in April, traders can also expect heightened volatility as BTC’s price is now above its all-time high. Investors will need to be very careful and do their research while engaging with leverage, as liquidations could be triggered due to volatile movements,” cautions Chaturvedi.
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The Bitcoin rally might have a spillover effect on the price movement of altcoins – all cryptocurrencies and tokens that are not Bitcoin- as well. “Altcoins, especially memecoins aren’t far behind either. The minor retracements after its $70,000 high in the last 24 hours was an impetus for altcoins to surge. Solana and Ethereum are already riding this wave with around 12 and 15 per cent growth in the last seven days, respectively. Shib is predicted to reflect similar patterns based on its market indicators and is already up by 28 per cent in the last seven days,” Menon notes.