Bitcoin Prices Surge: What’s Behind the Growth and What Lies Ahead?

Bitcoin symbol is seen on Bitcoin ATM kiosk in the city center of Krakow, Poland on July 26th, 2024. The buzz around cryptocurrencies is back with Bitcoin prices getting a boost this year and investors and the media renewing their interest. To a retail investor though, the question of particular interest is: What has changed fundamentally in the cryptocurrency arena to help Bitcoin prices swell more than 120% in the last twelve months?

The Bitcoin growth story does not end here. There is growing chatter about Bitcoin potentially breaching the $100K mark. Which, given the current price around $61,000, that would be a move of over 60% over several years. What remains to be seen is whether this story plays out the same way oil prices did during the 2008-09 financial crisis (the number 100 does tend to spook investors), or if the Bitcoin story has an altogether different ending.

In general, investment assets are difficult to price using static demand-supply models. This is particularly true for cryptocurrencies. But, as in the case of any investment asset, expectations about demand and supply positions could help point in the general direction. Notably, Bitcoin prices over the years have primarily been driven by the perception of how a particular piece of news boosts or hurts the potential number of Bitcoin users and their transaction volume in the long run.

On the supply side, the number of available Bitcoins is capped, and almost 94% of the capped number is already mined. With limited supply side upside, it is sensible to focus on the demand – both in terms of users and transaction volumes.

Several factors have changed on the demand side that paints a positive picture for crypto demand over the long term. The renewed belief that Bitcoins are a real substitute for the US dollar, political support from key figures, and the introduction of Blackrock’s spot Bitcoin ETF have all contributed to a more favorable outlook for Bitcoin.

Overall, the performance of Bitcoin over the years has been extremely volatile. Returns for the asset have fluctuated significantly, making it a risky investment. However, the interest in Bitcoin options at the $100K mark indicates a potential upward momentum in the future.

While some positions may be speculative in nature, if the demand for Bitcoin holds up, it is likely only a matter of time before Bitcoin prices cross the $100K barrier. The future of Bitcoin as an asset class remains uncertain, but the current trends suggest a positive outlook for the cryptocurrency.