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Bitcoin has broken previous records, surpassing the $100,000 milestone for the first time to reach an all-time high of $104,088 on Wednesday night in New York. The flagship cryptocurrency had fallen to $94,587 on Wednesday but staged a notable recovery. Several key factors contributed to this unprecedented increase:
No. 1 Federal Reserve Chairman Powell Compares Bitcoin to Gold
In a significant nod to the traditional financial sector, Federal Reserve Chairman Jerome Powell spoke about Bitcoin during the New York Times DealBook Summit. When asked about the perception of Bitcoin as a symbol of faith or lack thereof in the US dollar and the Federal Reserve, Powell offered a nuanced perspective.
“I don’t think people think that way about it,” Powell said. “People use Bitcoin as a speculative asset, right? It’s like gold. It’s like gold, only it’s virtual. It’s digital. People do not use it as a form of payment or as a store of value. It is very volatile. It is not a competitor for the dollar; “It’s really a contender for 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… it’s over. How did the bet against digitization work for Kodak, Blockbuster, Sears, Yellow Pages, newspapers, taxis, the postal service, libraries, travel agencies, etc.?
It’s the most obvious trade in history.
— David Bailey🇵🇷 $0.85 mm/btc is the floor (@DavidFBailey) December 4, 2024
#2 Russia’s Putin signals openness towards Bitcoin
Adding to the momentum, Russian President Vladimir Putin made comments during the Russia Calling forum that many interpret 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 develop one way or another because everyone will strive to reduce costs and increase reliability.”
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The backdrop of Putin’s comments includes speculation about an upcoming “Bitcoin space race” between global superpowers. President-elect Donald Trump, during his election campaign and at the Bitcoin 2024 conference in Nashville, pledged 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 the Trump team, emphasized the urgency of this initiative in X: “The Bitcoin space race is already here. […] It couldn’t be clearer what’s going on. It should be a national priority to maintain the Bitcoin Strategic Reserve in the first 100 days of the Trump administration. “We need an aggressive plan to increase the US’s proportional ownership of the Bitcoin supply.”
It couldn’t be clearer what’s going on.
It should be a national priority to maintain the Bitcoin Strategic Reserve in the first 100 days of the Trump administration. We need an aggressive plan to increase the US’s proportional ownership of the Bitcoin supply.
— David Bailey🇵🇷 $0.85 mm/btc is the floor (@DavidFBailey) December 4, 2024
#3 Strong spot demand and institutional interest
The rise was supported by strong spot market activity and significant institutional participation. During the rally, open interest in Bitcoin futures skyrocketed by more than $4 billion, according to data By Coinalyze. Funding rates also reached unprecedented levels, surpassing the peaks seen two weeks ago when Bitcoin first hit $99,500.
Importantly, the rally was driven by spot markets and not just derivatives speculation, indicating healthy and sustained demand. The infamous “Great Wall of Sales” of $100,000, which had previously resisted the bullish move, was decisively broken on the second attempt.
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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. Although it is not confirmed, there is a strong possibility that MARA used these funds to accumulate Bitcoin during the price surge.
Supporting this idea, CryptoQuant reported: “Bitcoin surpasses $100,000 as institutional demand drives the market. “The Coinbase Premium Index highlights sustained buying pressure from US investors.”
#4 Incredulous retail market
Despite the bullish momentum, retail traders appear to be in disbelief. On-chain analytics firm Santiment noted that while whale accumulation continues to strengthen, retail sentiment remains cautious.
Santiment noted: “As whale accumulation continues to look strong, the only factor holding back the $100,000 BTC story is the enthusiasm of retail traders.” The company highlighted that in early December there was growing skepticism and expectations of a significant price pullback following November’s historic gains. However, the current social media landscape reflects “hesitation and uncertainty on the part of traders,” with a ratio of negative to positive comments.
“With numerous indications over the years that crypto markets are moving in the opposite direction to crowd 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 become a reality very soon, as long as key stakeholders continue to collect more and more BTC.”
At the time of publication, BTC was trading at $102,681.
Featured image created with DALL.E, chart from TradingView.com
