YEREVAN (CoinChapter.com) — Why is Bitcoin BTC price up today? Several factors are influencing the leading cryptocurrency at the moment, which we discuss below, including the Federal Reserve’s dovish policy shift, Bitcoin ordinals, and ETF expectations. Meanwhile, Bitcoin price bounced off the $41,300 support with a 5% gain in the previous 48 hours and reached over $42,800 in the Asian-Pacific session.
However, traders should still exercise caution, as Bitcoin might still pare its price boost in the short term. As promised, here are the main reasons for the latest price increase, and the reasons to be cautious regardless.
Why is Bitcoin BTC Price Up? Look At Ordinals
In detail, Bitcoin Ordinals are essentially unique digital artifacts that are inscribed directly onto individual satoshis, which are the smallest units of Bitcoin. The process involves inscribing data, such as images or text, onto these satoshis. This is done through a technique that embeds this data into Bitcoin transactions.
While not exactly the same, Ordinals are much like Non-Fungible Tokens (NFTs) on the Ethereum blockchain. Each Ordinal, like an NFT, is unique and can represent digital collectibles, art, or other forms of content. The key aspect of Ordinals is that they are stored directly on the Bitcoin blockchain, leveraging its security and immutability.
The launch of the Ordinals protocol has notably boosted Bitcoin miners’ earnings over the past few months. The proportion of earnings from on-chain fees for miners has risen, which in turn supports further development within the Bitcoin ecosystem, including the BRC-20 asset class.
Lucy Hu, a Senior Analyst with Hong Kong-based digital asset management firm Metalpha, commented on the matter, predicting a long-term growth trajectory.
The stellar rise of Bitcoin Ordinals continues to fuel enthusiasm for Bitcoin miners, who have been heavily rewarded. We expect the long-term growth momentum of Bitcoin to remain on track.
Hu commented.
While Ordinals have influenced the blockchain, they are not the only reason why the Bitcoin BTC price is up today.
Federal Reserve Leans Toward Interest Rate Cuts
Bitcoin price does not exist separate from the macroeconomy, due to the heavy inflows from institutional investors in the previous years. Thus, retail investors should pay attention to the Fed and other authorities globally, to get a hunch of the future BTC vector.
In detail, the government might implement interest rate cuts after a series of quantitative tightening policies (eleven revisions) designed to battle runaway inflation. Once inflation is under control, the Fed may cut interest rates, re-expanding the economy and lowering the cost of borrowing.
Meanwhile, the dovish expectations came amidst indications of a stronger-than-expected US labor market and declining prices. Jan Hatzius, a Goldman Sachs analyst, noted that while healthy growth and labor market data suggest that “insurance cuts” are not imminent, the improved inflation news could mean that “normalization cuts” might occur a bit earlier.
He also mentioned that Federal Open Market Committee (FOMC) participants will likely remain cautious, preferring to be less optimistic in their inflation forecasts. However, the stability of interest rates could be enough to raise bullish Bitcoin hopes among traders.
Generally, an expanding economy leaves spare cash in investor pockets, which, in turn, leads to risk-on-market expansion. Being a risky asset class, cryptocurrencies might benefit from the situation.
Hopes Still High For Spot Bitcoin ETF Approval
In the trading scene, investor sentiment is crucial, as it can stir the market in any direction. While there is much debate to be held about the repercussions of a spot Bitcoin ETF approval, retail investors are ready to pump the price further on sheer expectations.
On Dec 18, Larry Fink, the chief executive of BlackRock, commented that the company’s ETF proposal now includes cash redemptions, a concession to the US Securities and Exchange Commission (SEC) that may improve the fund’s approval odds.
For those out of the loop, BlackRock is the largest asset manager globally with over $9 trillion under its wing. The firm has over 500 ETFs approved against one rejection, and the crypto scene expects the giant to win over the SEC in 2024, establishing the first spot Bitcoin ETF in the US.
While all the listed reasons play an important role in potential Bitcoin price appreciation, there are short-term red flags that traders should be aware of.
Bitcoin Price is Up But Whales Cautious
According to on-chain tracker Messari, Bitcoin whales are staying put, exercising caution. The number of BTC addresses holding over $1 million and over $10 million coins has been fluctuating in the previous weeks. Despite the fact that retail investors kept piling on Satoshis, they are generally NOT the ones swaying the markets.
The latest data from CoinShares confirms the short-term bearish expectations. According to their weekly report published on Dec 18, Bitcoin outflows stood at over $32 million, breaking the 11-week inflow streak.
While the ETF euphoria and the Ordinals frenzy might explain why Bitcoin BTC price is up today, traders should be cautious in their expectations. Several factors listed above speak of a possible cool-off before a bullish continuation. Thus, potential investors might want to look twice at on-chain metrics before making rash decisions based on hype.
