Investors are tempted by the enticing prospect of turning bullish on Bitcoin, especially following its remarkable 91% rally to $52,000 in just four months until Feb. 15. With Bitcoin‘s current valuation surpassing $1 trillion, it now stands among the world’s top 10 tradable assets, even outpacing Warren Buffett’s renowned Berkshire Hathaway with an $875 billion market capitalization.
To reach $70,000 from the current $52,000 level, Bitcoin requires an additional 34.5% gain, translating to a $350 billion increase in its capitalization. This surge would position Bitcoin ahead of silver and the United Kingdom’s pound, encompassing both bank deposits and currency bills. The critical question remains: Do the present conditions support Bitcoin’s $1.35 trillion valuation?
Some argue that Bitcoin overcame similar hurdles in November 2021 when it achieved its all-time high of $69,000. Repeating this feat seems more plausible now, given the approval of spot Bitcoin ETFs in the United States and the resolution of certain risks, such as Binance‘s regulatory challenges and the bankruptcy procedures of the FTX exchange.
The previous all-time high for Bitcoin was driven by low interest rates and soaring inflation, with traditional finance yields below 0.50% in November 2021. Investors sought risk-on assets for higher yields amid a spike in U.S. inflation to 6.8% year-over-year, the highest since June 1982. The latest CPI data for January 2024 reveals a 3.1% year-over-year increase, still above the U.S. Federal Reserve’s guidance but relatively contained. The current inflation scenario may not present a risk comparable to that of Bitcoin’s previous all-time high.
The introduction of spot Bitcoin ETFs is transforming Bitcoin into a more mature asset class. Since its launch on Jan. 11, the spot Bitcoin ETF industry has attracted significant net inflows, exceeding $4 billion in the U.S. and surpassing $35 billion in assets, representing 3.5% of Bitcoin’s market capitalization. This signals maturity compared to November 2021, and Bitcoin’s institutional inflow is noteworthy despite its price remaining below the previous all-time high.
While optimistic estimates of Bitcoin reaching $100,000 or higher haven’t materialized, the evolving landscape and increased adoption suggest potential for growth. As long as the U.S. dollar continues to depreciate, Bitcoin’s surge above $70,000 remains a possibility, though it’s unlikely to occur before the halving in April.
