The State of Bitcoin: Evaluating Its Position in the Global Market

In the months Bitcoin has experienced a notable surge rising by 91% to hit $52,000 by mid February after a four month upward trend. This substantial growth has pushed Bitcoins value to a $1 trillion placing it among the 10 most traded assets worldwide. Surpassing Berkshire Hathaway the investment powerhouse led by Warren Buffet with a market cap of $875 billion.

For Bitcoin to reach a milestone of $70,000 a 34.5% increase, from its level it would require an additional $350 billion in market capitalization. If achieved this would not surpass silver. Also overtake the British pound in total bank deposits and physical currency. The key question now is whether the current market conditions can support and justify Bitcoins target valuation of $1.35 trillion.

Reflecting on November 2021 Bitcoin had already overcome obstacles when it hit its record high of $69,000. With approval for spot Bitcoin Exchange Traded Funds (ETFs) in the US and resolved issues concerning major platforms, like Binance and FTX exchange bankruptcy proceedings there is greater feasibility for Bitcoin to replicate its past success.

Bitcoins record breaking surge was largely driven by the combination of interest rates and a spike, in inflation during that period. With traditional fixed income yields sitting at than 0.50% and U.S. Inflation soaring to 6.8% year over year in November 2021,the level since June 1982,investors felt compelled to seek out riskier investments for better returns. However the economic landscape has shifted since then. The recent Consumer Price Index (CPI) data from January 2024 shows a moderate year over year increase of 3.1%, which although higher than what the Federal Reserve had hoped for doesn’t pose the same level of risk as before Bitcoin hit its peak.

The arrival of spot Bitcoin ETFs on January 11 has made an impact drawing $4 billion in inflows in the U.S. And contributing to the maturity of this asset class. These ETFs now hold over $35 billion in assets making up 3.5% of Bitcoins market value. This is a contrast to gold ETFs, which collectively represent around 3% of golds market capitalization when excluding its use, in jewelry and medals.

Despite the attention and the established status of Bitcoin, as a type of investment its value is still 25% lower than its peak of $69,000. The expected surge in the use of Bitcoin and the optimistic predictions about its value hitting $100,000 or more have yet to come to fruition. Nonetheless recent achievements in the tech sector have demonstrated that achieving a market capitalization of $3 trillion to companies like Microsoft and Apple is indeed possible.

With changes in the financial arena and fluctuations in the U.S. Dollars value there is ongoing speculation about whether Bitcoin can exceed the $70,000 threshold. However there are reservations about this occurring before the halving event in April due to factors such, as market dynamics, investor confidence levels and regulatory influences that impact the cryptocurrency market.