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Bitcoin shattered previous records, surging past the $100,000 mark for the first time ever to reach an all-time high of $104,088 late Wednesday in New York. The flagship cryptocurrency had fallen to $94,587 on Wednesday but staged a remarkable comeback. Several key factors have contributed to this unprecedented increase:
#1 Fed Chairman Powell Compares Bitcoin to Gold
In a major acknowledgment from the traditional finance industry, Federal Reserve Chairman Jerome Powell discussed Bitcoin at the New York Times DealBook Summit. When Powell was asked about the perception of Bitcoin as a symbol of faith or lack thereof in the US dollar and the Federal Reserve, he offered a nuanced perspective.
“I don’t think people think that way,” Powell noted. “People use Bitcoin as a speculative asset, right? It’s like gold. It’s like gold, only it’s virtual. It’s digital. People don’t use it as a means of payment or as a store of value. It is very volatile. It is not a competitor to the dollar; it really rivals gold.”
This comparison to gold, a traditional store of value, was likely seen by many as another strong legitimization of Bitcoin in the financial ecosystem.
If your central bank owns gold but rejects digital gold, you’re done. How did betting against digitalization work for Kodak, Blockbuster, Sears, Yellow Pages, newspapers, taxis, postal services, libraries, travel agencies, etc.?
It’s the most obvious trade in history https://t.co/tdJp8XCTjO
— David Bailey
$0.85mm/btc is the floor (@DavidFBailey) December 4, 2024
#2 Putin from Russia signals openness to Bitcoin
Adding to the momentum, Russian President Vladimir Putin made comments during the Russia Calling forum that many interpreted as an endorsement of Bitcoin.
“Who can ban Bitcoin? Nobody,” Putin said. “And who can prohibit the use of other electronic payment methods? Nobody. Because these are new technologies. And no matter what happens to the dollar, these tools will evolve one way or another as everyone will strive to reduce costs and increase reliability.”
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The background to Putin’s comments includes speculation about an upcoming “Bitcoin Space Race” between global superpowers. President-elect Donald Trump promised during his election campaign and at the Bitcoin 2024 conference in Nashville to establish a strategic Bitcoin reserve in the United States. He even suggested that some of the US debt could be ‘paid off’ with Bitcoin.
David Bailey, CEO of BTC Inc and advisor to Trump’s team, emphasized the urgency of this initiative on X: “The Bitcoin Space Race is here. […] It couldn’t be clearer what’s happening. It should be a national priority to maintain the Strategic Bitcoin Reserve in the first 100 days of Trump’s administration. We need an aggressive plan to increase US proportional ownership of the Bitcoin supply.”
It couldn’t be clearer what’s happening.
It should be a national priority to maintain the Strategic Bitcoin Reserve in the first 100 days of Trump’s administration. We need an aggressive plan to increase US proportional ownership of the Bitcoin supply. https://t.co/a85wLNoXSS
— David Bailey
#3 Strong spot demand and institutional interest
The increase was supported by robust spot market activity and significant institutional participation. During the surge, open interest in Bitcoin futures shot up by more than $4 billion facts from Coinalyse. Funding rates also reached unprecedented levels, surpassing the peaks of two weeks ago when Bitcoin reached $99,500 for the first time.
Importantly, the rally was driven by spot markets and not just derivatives speculation, indicating healthy and sustained demand. The infamous “Great Sell Wall” of $100,000, which had previously resisted an upward move, was finally breached on the second try.
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Market analysts speculate that big players like Michael Saylor may have been behind the significant buying pressure. Notably, MARA Holdings, Inc., the largest publicly traded Bitcoin mining company by market capitalization, recently raised $850 million through an offering of zero-coupon convertible senior notes due 2031. While unconfirmed, there is a strong possibility that MARA has used these funds to accumulate Bitcoin during its price rise.
In support of this idea, CryptoQuant reported: “Bitcoin passes $100,000 as institutional demand drives the market. The Coinbase Premium Index highlights the continued buying pressure from U.S. investors.”
#4 Retail market full of disbelief
Despite the bullish momentum, retail traders appear to be in a state of disbelief. On-chain analytics firm Santiment noted that while whale accumulation continues to increase, retail sentiment remains cautious.
Santiment noted: “As whale accumulation continues to look strong, retail traders’ excitement is the only factor holding back $100,000 BTC history.” The company highlighted that there was growing skepticism and expectations of a significant price recovery in early December after November’s historic gains. However, the current social media landscape reflects “trader hesitation and uncertainty,” with a ratio of negative to positive comments.
“With numerous indications over the years that crypto markets are moving in the opposite direction of public expectations, we should be encouraged by the FUD and high profit-taking of our fellow traders,” Santiment added. “There may be a bit more of a battle between bulls and bears at this level, but we could see the long-awaited milestone come to fruition very soon as long as key stakeholders continue to accumulate more and more BTC.”
At the time of writing, BTC was trading at $102,681.
Featured image created with DALL.E, chart from TradingView.com