The reportedly recent increase in the Bitcoin price has attracted the interest of investors and critics. Many people have linked the rise to recent events such as Donald Trump win the presidential seat but according to exponent the two drivers behind the value of Bitcoin price are more profound.
A combination of the halving of reward on Bitcoin price and demand pressure from exchange-traded funds, ETFs are exerting supply pressure that is putting pressure on the price of Bitcoin to go up. As Jesse Myers noted, co-founder at Onramp Bitcoin, “Trump’s victory may be a driving force behind or a trigger, but it is not the space’s yet untold and unfolding saga”.
Trump’s Win: It Works as a Catalyst but Not as a Backbone
Most pundits in the world of finance have attributed the recent changes in Bitcoin price to Trump’s victory in the United States’ presidency. President Trump’s administration is believed to prove more amicable to cryptocurrency and this perceived endorsement has propelled Bitcoin further. However, Myers, a key Bitcoin analyst, thinks that this factor just forms a part of something much bigger.
Myers commented, “If you’re wondering what’s happening with #Bitcoin… Yes, the coming Bitcoin-friendly administration has given the recent boost needed… But that’s not the story I’m trying to tell.” He again pointed out which other factors are taking far bigger parts for the Bitcoin performance.
Post-Halving Supply Shock Amplifies Demand
Among the driving forces behind the current upward movement is the supply side effect or as was the case with Bitcoin halving in April. The halving which occurs after every four years lessens the amount of reward that the miners are paid for the transaction on the blockchain. This year’s halving reduced block rewards from 6.25 BTC to 3.125 BTC which reduces the amount of new Bitcoin being introduced into the circulating supply.
Myers added that this supply shock has a significant effect on the characteristics of fluctuations in Bitcoin prices. Due to the fact that there are currently fewer Bitcoins than before, the rate at which people are asking for Bitcoin prices is higher than the rate at which new Bitcoins are being created. “That is an alarming situation more so when the supply that is offered on shelves cannot be afforded by most customers owing to high prices,” he continued.
To attain a different supply-demand ratio the prices should go up; this results in a cycle of raised demand. This behavior is not a new case since price increases were witnessed after the halving of Bitcoin in 2012, 2016, and 2020.
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ETFs Intensify Demand for Bitcoin Price
Apart from the post- halving impacts, the inception of Bitcoin ETF in this year has energized the demand of the crypto currency most. They give institutional and ordinary investors a chance to invest in Bitcoins because they do not have to buy and own Bitcoins.
Around 13,940 Bitcoin price were bought on the same day in the United States when Bitcoin ETFs were trading actively on the market. This level of demand is quite high especially considering the fact that only 450 BTC is mined on a daily basis, which further stretches the supply beyond demand. As said by James Check, an on-chain analyst, such a disparity drives the price of Bitcoin even higher. He stated that “100s of billions of new and recycled gold supply go to market every year, yet, [Bitcoin] is a completely different ball game.”
As the supply of Bitcoin in circulation continues to get exhausted, this demand from ETFs is expected to put even more pressure on the prices, up. Some people predict the ETFs to cause institutional investment into Bitcoin price in large amount and thus may affect the price.
Conclusion on Bitcoin Price Driving Factors
While there might have been some modest positive development resulting from Trump’s win, this is not why we are seeing Bitcoin price hit such a high price. Jesse Myers and James Check, among other analysts, point to the need for explanations ranging from a post-halving supply shock to a demand booster such as the Bitcoin ETF. Due to the fact that only several Bitcoins per day and month can still be mined, and given that there is a great demand among institutional investors, Bitcoin prices will continue to increase.
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