Bitcoin Breaks $70,000 Again: Can It Reach New Highs Amid US Election and Institutional Adoption?

Bitcoin Breaks $70,000 Again: Can It Reach New Highs Amid US Election and Institutional Adoption?Bitcoin has touched the $70,000 mark again after four months. On Tuesday, October 29, shortly after the US stock market opened, Bitcoin broke through the key resistance level of $70,000 for the first time since June 7, rising by 4

Bitcoin Breaks $70,000 Again: Can It Reach New Highs Amid US Election and Institutional Adoption?

Bitcoin has touched the $70,000 mark again after four months. On Tuesday, October 29, shortly after the US stock market opened, Bitcoin broke through the key resistance level of $70,000 for the first time since June 7, rising by 4.22% on the day. It reached an intraday high of $71,521, with daily trading volume exceeding $47 billion, almost double the volume on Monday. So far this year, Bitcoin's price has surged by 68%. The rising Bitcoin price has also driven a rally in other cryptocurrencies and relevant stocks. As of Tuesday's midday US trading, Ethereum rose by 2.26%, Dogecoin by 3.53%, and Litecoin by 2.76%. On Monday's close, Canaan Inc., the "first mining stock" in crypto, rose by 9.15%, mining company Riot Blockchain by 5.39%, cryptocurrency exchange platform Coinbase by 5.39%, and Microstrategy, the largest Bitcoin holder, by 8.96%.

Analysts generally believe that the recent surge in Bitcoin is closely related to the changing landscape of the US election. During the campaign, Trump declared that if he were to return to the White House, he would designate Bitcoin as a strategic reserve asset for the US and make the country the "global cryptocurrency capital." Harris also chose a different path from Biden, vowing to support cryptocurrency. Options traders have ramped up their bets on Bitcoin, predicting that it will break through the historical high of $80,000 by the end of November. But from a fundamental perspective, how far can Bitcoin's latest "runaway journey" go?

Bitcoin Trading Heats Up

In March this year, Bitcoin reached an all-time high of $73,798 before entering a downward channel, hovering between $50,000 and $70,000. In August, it experienced a sharp correction, with a monthly decline of 10.25%. However, entering September, stimulated by central bank rate cuts and liquidity releases, Bitcoin reversed its decline, rising by 7.35% and achieving its best September ever. Over the past month, Bitcoin has been on an upward climb with a monthly rise of 12.30%.

During this time, massive funds have flowed into Bitcoin. According to asset management company CoinShares, Bitcoin ETFs saw inflows of $920 million in the week ending October 25, with total inflows of $25.4 billion year-to-date, nearly triple the inflow in 2021. Even last weekend, news that Tether, the world's largest stablecoin issuer, was under investigation by US regulators did not hinder the cryptocurrency's surge. This Monday, the total cryptocurrency market capitalization rose by 2.28%, reaching $2.33 trillion.

Over the past two weeks, asset management giant BlackRock has acquired over 30,000 Bitcoins (worth about $2.3 billion), bringing its holdings to over 400,000. According to US Securities and Exchange Commission filings, tech giant Microsoft is also considering entering the Bitcoin market.

Short-Term and Long-Term Tailwinds Fuel the Surge

Why has Bitcoin experienced a surge in recent days, with institutions and investors pouring in large amounts of money? In the short term, the Trump trade and loose monetary policies are two "catalysts." James Butterfill, Head of Research at CoinShares, noted in a report that Bitcoin's current price and flow are significantly influenced by US politics, and the recent surge in inflows may be related to the changing fortunes of the Republican Party. The shift in policy by major central banks across the globe towards easing liquidity has boosted risk sentiment, which has also given a tailwind to cryptocurrencies. Moreover, the market is widely anticipating potential inflationary pressures in the US after the election, objectively boosting this round of Bitcoin's rally.

Cao Xiao, Deputy Dean of the School of Finance at Shanghai University of Finance and Economics, told the 21st Century Business Herald that as Bitcoin gradually becomes a mainstream asset allocation, it is seen as an inflation-hedging asset, much like gold, becoming "digital gold." The recent monetary policies of the US Federal Reserve have intensified inflationary expectations, and "digital gold" has been rising in price along with gold.

In the long term, Bitcoin's fundamentals also have strong demand support. Cao Xiao believes that first, Bitcoin's application prospects in the financial industry are already clear, and its use in financial models such as financing and lending has become the most active area of financial innovation. Financial models centered around Bitcoin are also becoming the core of digital finance, which is the fundamental reason for the continued rise in Bitcoin prices. Second, with the clear practical uses of Bitcoin, the launch of Bitcoin futures and spot ETFs has made it a mainstream asset allocation for asset management institutions. The increased allocation and holding of Bitcoin by financial institutions have boosted demand for it.

At the same time, the rise of Bitcoin is also correlated with the strong performance of large tech stocks. Wang Yingbo, Assistant Researcher at the Information Institute of the Shanghai Academy of Social Sciences, told the 21st Century Business Herald that the US election and the easing cycle are short-term factors driving the rise of Bitcoin. Looking at the long term, Bitcoin is a digital asset, and its significant rise is driven by the accelerated digitization of the entire industry, with resources shifting rapidly from carbon-based to silicon-based. This is the long-term factor driving the rise of Bitcoin. Therefore, we can see that over the past year, not only Bitcoin, but also the seven giants of the US digital economy, have been rising sharply, with their gains even surpassing Bitcoin.

Can It Keep Rising?

Looking forward, the cryptocurrency market is dominated by a bullish sentiment. Traders are increasing their bets on call options. Data shows that call options expiring on November 8 are concentrated at a strike price of $75,000, while those expiring on November 29 (open interest) are concentrated around $80,000. David Lawant, Head of Research at cryptocurrency brokerage FalconX, said, "We believe the market consensus is that Bitcoin is likely to perform well regardless of the outcome of the US election. Team analysis shows that option activity around the upcoming election exhibits a clear upward bias."

Many institutions have given more optimistic price targets. Investment bank Bernstein predicts that Bitcoin could reach $200,000 by the end of 2025. Sathvik Vishwanath, Co-founder and CEO of Unocoin, said that Bitcoin has a certain cyclical nature and typically sees strong growth at the end of the year. 2024 may see a similar pattern. Historical trends show that Bitcoin has averaged a 26% gain in October, 36% in November, and 11% in December, supporting the optimistic expectation of Bitcoin potentially breaking through $100,000.

Wang Yingbo believes that Bitcoin is essentially a speculative asset, not a trading currency, and its short-term price is influenced by various disruptive factors, making it difficult to determine. But in the long term, if there are no higher-dimensional digital currency technologies emerging, Bitcoin is expected to maintain an upward trend.

Cao Xiao points out that multiple factors will support the long-term rise of Bitcoin. In addition, the Bitcoin market is transitioning to an institution-dominated market, and the volatility of its price will continue to converge, so it may not necessarily surge to $80,000 in the short term.

Bitcoin's Future Is Not Without Potential Challenges

Nicholas Sciberras, Senior Analyst at CollectiveShift, points out that if Bitcoin continues to be targeted by governments and its energy consumption faces further regulatory pressure, this could put pressure on Bitcoin's long-term rise. Another long-term concern is how cryptocurrency security is guaranteed in the face of a decrease in block rewards.

"As a new investment, Bitcoin still has relatively high market risk, and the possibility of significant fluctuations still exists. Pay attention to investment risks," Cao Xiao reminds.