Factors Driving Today’s Surge in Bitcoin Price
Bitcoin price suffered a correction, pushing BTC below $41,000 momentarily on Monday.
Bitcoin Average Transaction Fee climbs to $38.43 per transaction, highest level in 2023.
Crypto experts criticize rising transaction fees on Bitcoin, arguing Layer 1 chains do not scale.
Bitcoin price drops below $41,000 on Sunday as BTC holders engage in profit-taking activities, seen in on-chain data. On December 15, BTC inflow to exchanges hit its highest level since March 2023. Bitcoin analysts on crypto Twitter believe that BTC’s uptrend is close to its end.
Also read: Bitcoin price spikes to $42,000 in response to November US CPI data release
Daily Digest Market Movers: Bitcoin sees spike in transaction fees,exchange inflow climbs
Bitcoin Average Transaction Fee (BATF) climbed to 38.43 on December 18, as the network saw an increase in transactions. The average transaction fee on Bitcoin hit a 20-month high since unconfirmed transactions continued to pile up.
On December 16, transactions involving inscriptions, a new way to store data on the BTC blockchain, spent nearly $10 million in BTC transaction fees, based on data from Dune Analytics.
IntoTheBlock data reveals that Bitcoin noted an inflow of $860 million to cryptocurrency exchanges in the past week, the highest level since March. An influx of BTC to exchanges is typically indicative of traders’ intention to sell or book profits and it is likely that investors decided to cash in on profits after BTC’s recent rally.
Michäel van de Poppe, crypto analyst and trader, believes that we are nearing the end of Bitcoin’s current uptrend. Poppe argues that $48,000 to $51,000 likely represents a BTC peak and a correction will probably ensue in the largest asset by market capitalization.
Crypto expert behind the Twitter handle @_Checkmatey_ argues that Layer 1 chains do not scale and critiques Bitcoin’s transaction fee spike. The expert commented on the rise in transaction fees. He explained that before inscriptions arrived on the Bitcoin blockchain, BTC blocks were full of monetary transactions only, no other data was stored on the chain.
For a chain that stores monetary transactions, BTC fees would peak when the chain processed a large volume of transactions, like 350,000 transactions in a day. However, the arrival of inscriptions on the Bitcoin blockchain has congested it and proved that Layer 1 chains like Bitcoin suffer from congestion when transaction count rises, these chains cannot be expected to scale and accommodate a surge in transactions.
Technical Analysis: Bitcoin price likely to dip below $40,000 before a rebound
Bitcoin price is likely to suffer a drop below the $40,000 level, to a Fair Value Gap, as seen in the price chart below. Once the gap is filled, BTC price is expected to resume its uptrend and eye the $43,000 target, a level previously seen last week.
Bitcoin price is currently below the 10-day Exponential Moving Average (EMA), and above two long term EMAs, t the 50 and 200-day.
A daily candlestick close below the psychological barrier at $40,000 could invalidate the bullish thesis for Bitcoin price.
Why is Bitcoin price up today?
In the dynamic world of cryptocurrency, the price of Bitcoin is subject to constant fluctuations, influenced by a myriad of factors ranging from market sentiment to regulatory developments. Today’s remarkable surge in Bitcoin’s price has captured the attention of investors and enthusiasts alike. This article aims to dissect the various elements contributing to the current upward momentum in Bitcoin prices.
One of the primary drivers behind the surge in Bitcoin prices today is a positive shift in market sentiment. Cryptocurrency markets are highly reactive to news and events, and positive sentiment can quickly translate into increased demand. Positive sentiment can be fueled by a variety of factors, including favorable regulatory developments, institutional interest, or even influential endorsements from prominent figures.
The involvement of institutional investors has been a significant catalyst for Bitcoin’s recent surge. As more traditional financial institutions and large corporations express interest in cryptocurrencies, the perceived legitimacy and acceptance of Bitcoin as a viable asset class increase. This institutional interest can lead to increased demand and higher prices.
Bitcoin is often regarded as a hedge against economic uncertainty and inflation. Global economic factors such as inflation concerns, geopolitical tensions, or economic downturns can drive investors towards alternative assets like Bitcoin. The current economic climate, marked by uncertainties, may be prompting investors to seek refuge in the decentralized and limited-supply nature of cryptocurrencies.
Regulatory news can have a profound impact on the cryptocurrency market. Positive regulatory developments, such as clear guidelines or favorable legislation, can instill confidence in investors and contribute to a surge in prices. Conversely, negative regulatory news may have the opposite effect. Monitoring regulatory changes and their potential impact on the cryptocurrency space is crucial for understanding short-term price movements.
Advancements in blockchain technology and the broader cryptocurrency space can also influence Bitcoin prices. Positive developments such as network upgrades, improvements in scalability, or enhanced security measures can bolster confidence in Bitcoin as a viable long-term investment. Conversely, technological setbacks or vulnerabilities may lead to a decline in prices.
Speculation plays a significant role in the cryptocurrency market. Traders and investors often engage in speculative activities based on short-term price movements. Positive speculation, fueled by news, rumors, or technical analysis, can result in increased buying activity and upward price pressure.
Supply and Demand Dynamics:
The fundamental economic principle of supply and demand is a key determinant of Bitcoin prices. Bitcoin’s fixed supply of 21 million coins and the scheduled halving events that reduce the rate of new coin issuance contribute to its scarcity. As demand for Bitcoin increases, driven by factors like institutional interest or macro-economic conditions, prices can experience upward pressure.
The surge in Bitcoin prices today is a complex interplay of various factors, each contributing to the overall market dynamics. Market sentiment, institutional interest, macro-economic conditions, regulatory developments, technological advancements, speculation, and supply and demand dynamics all play a role in shaping the cryptocurrency landscape. As the cryptocurrency market continues to evolve, understanding these multifaceted influences is essential for investors and enthusiasts alike.