The price of Bitcoin surpassed $100,000 on December 5th, hitting a record high, leading investors to ask why is Bitcoin rising? The optimism surrounding Bitcoin's rise is also affecting other cryptocurrencies. Several of the top 10 cryptocurrencies in the world by market capitalization have also seen an increase.
As of writing, the global cryptocurrency market cap is $3.87 trillion, up by 130.76% from a year ago. Among them, the market cap of Bitcoin is at $2.04 Trillion, representing a Bitcoin dominance of 52.58%.
Key Drivers Behind Bitcoin's Rise
Many investors have wondered why Bitcoin has risen so quickly in such a short period of time, and here are several key reasons behind Bitcoin's surge:
Institutional Demand
Institutional demand has been the main catalyst for the current Bitcoin rally. Many institutions have invested heavily in Bitcoin, which makes it even more trustworthy. MicroStrategy, for example, holds more than 400,000 bitcoins, and as the value of bitcoins increases, the company has earned substantial profits.
A lot of money has poured into Bitcoin spot ETFs. According to Coinglass data, bitcoin spot ETFs have seen net inflows on 16 of the past 20 days (Nov. 6 to Dec. 5), including $1.36 billion in a single day on Nov. 7.
Political and Regulatory Tailwinds
Optimism from the regulatory environment is a big reason for Bitcoin's rise.
Newly elected US President Donald Trump has nominated Paul Atkins as chairman of the US Securities and Exchange Commission, and Atkins is a well-known pro-cryptocurrency figure. This news is seen as an important signal that cryptocurrencies will face a friendly regulatory environment in the next four years.
Additional news is that the Trump administration is expected to establish a cryptocurrency advisory council and possibly set up a Bitcoin strategic reserve, further fueling optimism about Bitcoin.
Market Sentiment
According to CoinMarketCap data, the Crypto Fear and Greed Index indicates extreme greed, suggesting heightened speculative interest.
In addition, in a recent interview, Federal Reserve Chairman Jerome Powell said that Bitcoin is in competition with gold, not the U.S. dollar. "People are using Bitcoin as a speculative asset - it's like gold," he said. This comment also bolstered Bitcoin's appeal as a store of value.
Technical Momentum
It is worth noting that Bitcoin recently broke out of a pennant pattern, signaling a continuation of its bullish trend. Bullish pennant is a sustained form that typically appears in a strong upward trend.
Some analysts pointed out that the next resistance level of bitcoin is expected to be $105,000 and $113,000.
The above fundamental insights are the answers generated by Intellectia.AI, which also provides an in-depth technical analysis and outlook on Bitcoin, worth clicking to view.
How High Can Bitcoin Go? Future Trends of Bitcoin
The improved regulatory environment is a long-term positive factor for cryptocurrencies, including Bitcoin. But there is another potential positive factor for Bitcoin that has been overlooked by many investors, and that is, the influence of sovereign states on Bitcoin.
In November 2024, MicroStrategy founder Michael Saylor stated in a speech that Bitcoin is an asset with no counterparty risk from competitors, countries, companies, creditors, culture, or currencies. He claims that the Bitcoin Strategic Reserve will be the greatest transaction of the 21st century.
Binance founder Changpeng Zhao(CZ) expressed his agreement with Saylor's speech on X, and commenting that there will be a race for nations to print money to buy bitcoin, ie, the Bitcoin Strategic Reserve. No one can afford to be last.
Why do the founders of both MicroStrategy and Binance believe that sovereign states should consider Bitcoin as a strategic reserve asset? Maybe we can answer this question from the perspective of game theory.
Imagine a Bitcoin reserve race in which two countries, A and B, are considering whether to use Bitcoin as their strategic reserve asset. In this case, the choice between A and B presents four scenarios, the classic "prisoner's dilemma" in game theory.
Case 1: If A and B both choose to hold Bitcoin, both countries will either gain or lose together.
Case 2/3: If only A chooses to hold Bitcoin and B does not. A will gain when Bitcoin rises in value, while B has nothing. But A will also suffer losses when bitcoin falls, and B avoids the risk. (and vice versa)
Case 4: If neither country holds Bitcoin. Although this situation does not bring additional benefits, it is also not risky and is a safe option.
We can see that in the scenario of countries purchasing Bitcoin, if all countries cannot reach a consensus agreement not to use BTC as a reserve asset, then the prisoner's dilemma cannot be escaped. And obviously, such an agreement is impossible to reach.
So, we can foresee that once a country takes the lead in buying Bitcoin, other countries may feel pressure and fear falling behind, so they will join the ranks of Bitcoin holders, ultimately pushing up the price of Bitcoin, potentially taking it beyond $100,000 to entirely new hights.
Now, back in real life, there are already reports that the Trump administration is preparing to consider establishing a strategic reserve of Bitcoin. Once confirmed, many countries are likely to follow suit and consider buying Bitcoin as a strategic reserve asset. This is the deep reason why the founders of MicroStrategy and Binance are bullish on Bitcoin.
Should retail investors buy Bitcoin?
Retail investors should conduct in-depth technical analysis of Bitcoin before investing in it. Here's Intellectia.AI's latest technical analysis of Bitcoin:
Trend: Bitcoin is in a strong uptrend, with its price breaking key psychological and technical resistance levels. The recent surge is supported by high trading volumes.
RSI (14): At 66.45, Bitcoin is approaching overbought territory, indicating potential for a short-term pullback.
MACD: Positive at 4,247.92, but the histogram shows a slight decline (-652.83), suggesting momentum may be slowing.
By using advanced algorithms, Intellectia.AI gives in-depth insights into investing in Bitcoin.
Intellectia.AI believes that Bitcoin's long-term outlook remains bullish, supported by institutional adoption, macroeconomic trends, and its scarcity-driven value proposition. However, the current RSI and overbought conditions suggest a potential short-term correction. If you are a long-term investor, consider dollar-cost averaging to mitigate the risk of buying at a peak.
