Bitcoin price on the rise,halving and other factors of this increase.
Bitcoin, the world's most popular digital currency, has reached a new record high of over $50,000, thanks to the momentum of small investors who see in it an opportunity to make money and protect themselves from inflation. According to a report by JP Morgan, one of the world's leading financial firms, there are three factors behind this phenomenon: the pre-halving effect, Bitcoin and Ethereum ETFs, and the growing interest in cryptocurrencies.
Halving is an event that occurs every four years in the Bitcoin network, which consists of halving the reward miners receive for validating transactions and generating new bitcoins. The next halving is scheduled for April 2024, and will bring the reward from 6.25 bitcoins per block to 3.125 bitcoins.
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This event has an impact on the supply and demand of the digital currency, as it reduces the amount of bitcoins entering circulation and increases their scarcity. Investors, especially retailers, anticipate this effect and buy bitcoins before the halving occurs, expecting their price to rise afterwards. This is what has historically happened in the previous three halvings, which were followed by sharp rises in bitcoin's value.
According to JP Morgan, data shows that retail investors are already outpacing institutional investors in buying bitcoins, which is reflected in the increased flow of bitcoins from smaller to larger portfolios. This indicates that small investors are more involved with cryptocurrencies than ever before, driven by the rise of bitcoin and Ethereum in recent months.
Another factor that is driving Bitcoin's price is Bitcoin and Ethereum ETFs (exchange-traded funds), which are financial products that allow you to invest in these cryptocurrencies without having to buy them outright. ETFs make it easier for investors to access cryptocurrencies, as they can be bought and sold like stocks on stock exchanges.
Recently, several spot Bitcoin ETFs, which track the price of the digital currency in real time, have been approved in countries such as Canada and Brazil. In addition, the first Ethereum ETF, the second largest cryptocurrency, is expected to be approved in May, which is also experiencing strong growth thanks to its upcoming Dencun update, which will improve its scalability and security.
According to JP Morgan, Bitcoin and Ethereum ETFs are important catalysts for the price of these cryptocurrencies, as they increase their liquidity and market exposure. However, it also warns that, for the time being, ETF inflows have not been sufficient to offset selling pressure from miners and other sellers, which could limit Bitcoin's upside potential.
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The third factor behind the Bitcoin boom is the growing interest in cryptocurrencies in general, both from investors and users. Cryptocurrencies offer an alternative to the traditional financial system, which has been affected by the economic crisis and the monetary expansion caused by the pandemic. Cryptocurrencies are decentralized, transparent, immutable and resistant to censorship, making them attractive to those seeking more freedom, privacy and security.
Source taken from Investing.com
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