Bitcoin reached a new all-time high of $108,000 on December 17, extending a strong bull run that began in 2023. The cryptocurrency has surged nearly 150% this year, driven by growing demand and limited supply growth. The Federal Reserve’s unwinding of high interest rates, alongside similar actions by other central banks, has further fueled the upward momentum.
According to data from SoSoValue, spot Bitcoin exchange-traded funds (ETFs) have now accumulated over $36 billion in assets, pushing the total value of Bitcoin ETFs to more than $120 billion. This growth suggests that Bitcoin is increasingly vying with gold as an investment asset.
Meanwhile, Bitcoin’s supply has been constrained, with mining difficulty rising sharply. Data from CoinGlass shows that the amount of Bitcoin held on exchanges has continued to decrease throughout the year, further tightening supply.
These supply-demand dynamics are expected to continue driving Bitcoin prices upward, with growing interest from governments and corporations. MicroStrategy, once a small company, has seen its valuation soar to $90 billion, highlighting the expanding corporate embrace of Bitcoin.
Looking ahead, Bitcoin’s next major catalyst may come from the Federal Reserve’s rate decision this Wednesday. Economists predict a 0.25% rate cut, marking a total reduction of 1% for the year. Historically, Bitcoin and other risk assets perform well when the Fed cuts rates, as investors often shift from low-yielding money market funds to higher-risk assets.
However, a potential hawkish tone from the Fed could temper Bitcoin’s rally. Inflation remains a significant concern, with the headline Consumer Price Index (CPI) rising to 2.7% and core CPI holding steady at 2.2%. The Fed may proceed with the rate cut, but its outlook could remain cautious due to persistent inflation risks, particularly as political factors like tax cuts and tariffs under former President Trump may contribute to ongoing inflationary pressures.
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