Bitcoin's Meteoric Rise: A $8 Billion Surge in Two Days $100,000 Target Achievable?

Bitcoin's Meteoric Rise: A $8 Billion Surge in Two Days $100,000 Target Achievable?Bitcoin's price surged to a new all-time high, fueled by the dual tailwinds of Trump's election victory and expectations of a more accommodative Federal Reserve policy. A staggering $8 billion (approximately 580 billion RMB) increase was witnessed within just two days

Bitcoin's Meteoric Rise: A $8 Billion Surge in Two Days $100,000 Target Achievable?

Bitcoin's price surged to a new all-time high, fueled by the dual tailwinds of Trump's election victory and expectations of a more accommodative Federal Reserve policy. A staggering $8 billion (approximately 580 billion RMB) increase was witnessed within just two days. However, this rally, driven by policy expectations and speculative fervor, also highlights the market's inherent volatility and fragility. This article delves into the underlying causes of this price surge, the potential risks involved, and the feasibility of reaching the $100,000 target.

The Trump Effect and Fed Policy Expectations: Twin Engines of Growth

Bitcoin's recent rally began following the November 5th, 2024, US presidential election. On November 13th, Bitcoin briefly surpassed $93,400, marking a new all-time high and representing an approximately 35% increase since before the election. Data from Santiment reveals that investors reaped nearly $8 billion in profit during the 48-hour period between November 13th and 15th, the highest level since October 9th.

This surge is primarily attributed to two factors: firstly, US inflation data aligned with analyst expectations, strengthening market anticipation of a further 25-basis-point interest rate cut by the Fed in December. Secondly, Trump's campaign promises of pro-cryptocurrency policies significantly boosted market sentiment. His pledges, such as creating a Bitcoin reserve and replacing SEC Chair Gary Gensler, known for his tough stance on crypto, acted as key catalysts for the bullish market. The cryptocurrency industry's $170 million in donations to Super PACs supporting Trump-aligned congressional candidates also reflects the sector's expectations and bets on policy changes.

Institutional Investor Influx: Exacerbating the Bull Market

The active participation of institutional investors injected further momentum into the Bitcoin rally. Data shows that open interest in CME Bitcoin futures reached a record high of 35,973 contracts in November, with a notional value of $13.9 billion. Since election day (November 5th), US spot Bitcoin ETFs have seen net inflows of $4.7 billion, and the total assets under management of Bitcoin ETFs issued by 12 institutions have reached approximately $94 billion. BlackRock's iShares Bitcoin Trust, with nearly $43 billion in assets, has become the world's largest Bitcoin fund, clearly demonstrating institutional investors' positive outlook on this emerging asset class.

High-Altitude Correction: Risks and Volatility

However, the sustainability of this rally faces challenges. On November 15th, Fed Chair Powell stated that a rate cut wasn't imminent, causing Bitcoin's price to dip below $87,000, a roughly $6,500 drop from its November 13th peak. Large miners also cashed out approximately 25,000 Bitcoins, signaling profit-taking pressure.

Derivatives market data also indicates a cooling trend. K33 Research reports a decline in the premium of CME Bitcoin futures relative to spot markets, potentially suggesting a decrease in market risk appetite. James Davies, CEO of CryptoValley Exchange, a blockchain-based futures and options trading platform, points out that the current market is primarily driven by speculative trading and anticipates significant volatility until US policy becomes clearer. He specifically cautions investors to watch the $90,000 price level closely.

$100,000 Target: Optimism and Caution Coexist

Despite the correction, bullish traders remain optimistic. Options market data shows $850 million worth of options contracts betting on Bitcoin exceeding $100,000 before their December 27th expiration. Data from Deribit shows the highest concentration of call options at the $100,000 strike price, reflecting strong market expectations of breaching this psychological barrier.

Matt Hougan, CIO of Bitwise, believes Bitcoin needs further demand from investors and the Fed to break the $100,000 mark. He even boldly predicts that if Bitcoin significantly erodes gold's market share and governments hold it as a reserve asset, the price could reach $500,000.

Retail Investor Enthusiasm: Heightened Speculative Sentiment

Retail investor engagement is also heating up. Google search data shows Bitcoin-related searches have climbed to levels last seen before the 2022 industry crisis. Small-cap tokens have also experienced significant gains, with Dogecoin more than doubling since the November 5th election, reflecting heightened speculative sentiment but also exposing market vulnerability. Technically, the 14-week Relative Strength Index (RSI) indicates Bitcoin is in overbought territory, suggesting a potential correction. Analysts point out that a daily close below $73,777 would invalidate the current bullish thesis.

Macroeconomic Factors and Regulatory Policies: Continued Influence on Market Volatility

The divergence in the performance of small-cap tokens on November 15th, following Powell's comments on interest rates, reflects a decrease in market risk appetite. This demonstrates the cryptocurrency market's continued sensitivity to changes in macroeconomic policies and the regulatory environment.

Several factors will influence the longevity of this Bitcoin rally. Firstly, the trajectory of the Fed's monetary policy; a resurgence in inflation leading to tighter monetary policy could pose resistance to Bitcoin. Secondly, the concrete implementation of the Trump administration's policies, including the establishment of a regulatory framework and the creation of strategic reserves. Furthermore, the continued participation of institutional investors and changes in stablecoin supply will be crucial factors.

Data shows that since August 5th, 2024, Tether has minted over $7 billion USDT on the Ethereum blockchain. Simultaneously, the holdings of "whales" (holders of 1,000 to 10,000 Bitcoins) have increased significantly recently, indicating a bullish outlook among large investors but also potentially introducing price volatility risk.

Conclusion: Opportunity and Risk Await

Bitcoin's dramatic price swings highlight the significant uncertainties that remain in the market. While Trump's election and expectations of a more lenient Fed policy provided impetus for the price increase, and institutional investor participation bolstered market confidence, macroeconomic conditions, regulatory policies, and market speculation could still lead to sharp price fluctuations. Investors need to carefully consider these risk factors and make prudent decisions. Whether the $100,000 target is achievable will depend on the interplay of numerous factors in the future. Market participants should remain rational, avoid blindly following the herd, and effectively manage their risks.