Bitcoin Surges Past $100,000: Deciphering the Three-Stage Bull Run and Potential Risks

Bitcoin Surges Past $100,000: Deciphering the Three-Stage Bull Run and Potential RisksBitcoin's price has recently skyrocketed, breaching the $100,000 mark on December 5th, setting a new all-time high with a 6.1% increase in 24 hours

Bitcoin Surges Past $100,000: Deciphering the Three-Stage Bull Run and Potential Risks

Bitcoin's price has recently skyrocketed, breaching the $100,000 mark on December 5th, setting a new all-time high with a 6.1% increase in 24 hours. This astonishing surge not only propelled Bitcoin to record highs but also triggered simultaneous gains in other cryptocurrencies like Ethereum and Dogecoin. Ethereum surpassed $3832, registering a 4.67% rise in 24 hours and a 6.06% increase over the week; Dogecoin reached $0.4364, up 4.98%, and a staggering 188.02% over the month. Since the beginning of the year, Bitcoin's cumulative growth has reached an impressive 156%, with its price jumping from $68,000 to $100,000 in November alone. Such dramatic price volatility warrants a deeper examination of its underlying causes and the inherent risks involved.

Bitcoin's Three-Stage Bull Run: From Retail Speculation to National Recognition

Yu Jianing, co-chair of the Blockchain Special Committee of the China Communications Industry Association and honorary chairman of the Hong Kong Blockchain Association, summarizes Bitcoin's price movement as a "three-stage bull run."

The first stage is a retail-driven speculative bull market. Early Bitcoin price fluctuations and climbs stemmed primarily from curiosity about this emerging technology and speculative investment sentiment. Retail investors fueled the market's early development, their investment behavior largely based on price fluctuation expectations rather than a deep understanding of the underlying technology or value.

The second stage marks the entry of institutional investors. As asset management companies and financial institutions allocated Bitcoin through financial products like ETFs, its status shifted from a mere "speculative tool" to a configurable investment asset. The influx of institutional investors brought more stable and substantial capital inflows, providing strong support for Bitcoin's continued price increase. Institutional investors typically possess more professional risk management capabilities and a longer-term investment horizon. Their participation further enhanced Bitcoin's recognition and legitimacy in the financial market. Compared to the impulsive and short-term actions of retail investors, institutional investors make more rational decisions, focusing on long-term value investment.

The third stage involves recognition and policy support from some nations. Bitcoin is gradually being viewed by certain countries as a potential global reserve asset option. This trend is closely linked to the evolving global macroeconomic environment. Increased geopolitical uncertainty and declining confidence in traditional fiat currency systems are prompting more countries and institutions to pursue diversified asset allocation strategies, with Bitcoin being one such choice.

The US President-elect choosing a cryptocurrency advocate for the SEC chairmanship, and Russian President Putin publicly supporting cryptocurrencies, signing legislation recognizing them as "property" and establishing a corresponding tax framework, have provided strong policy tailwinds for this Bitcoin rally, signifying a growing acceptance of digital assets globally. This marks a shift in Bitcoin's applications from a purely digital currency towards broader asset allocation and international payment systems.

Bitcoin's Upward Potential and Risks After the $100,000 Breakthrough

Following Bitcoin's historic breach of the $100,000 mark, its subsequent upside potential has become a market focal point. Yu Jianing believes that, based on current market fundamentals, Bitcoin still possesses considerable upward potential. Persistent geopolitical uncertainty and waning confidence in traditional fiat currencies will continue to drive institutions and nations to explore incorporating Bitcoin into their asset allocation and foreign exchange reserves, leading to larger capital inflows and providing fundamental support for further price increases.

However, Yu Jianing also emphasizes that excessively speculating on peak prices during a bull market is not a rational strategy. While fundamental factors support Bitcoin's further rise, accurately predicting its peak remains extremely difficult. Sharp price fluctuations are common in bull markets, and investors should maintain a rational perspective and avoid blindly chasing high prices.

It's crucial to note that Bitcoin's price surge is accompanied by substantial risks. Coinglass data reveals that 214,220 users were liquidated within the past 24 hours, totaling $668 million in losses. This highlights the high-risk nature of leveraged trading in cryptocurrency markets. While high leverage can magnify potential gains, it also exponentially increases the risk of losses, potentially leading to complete capital depletion. Investors should avoid excessive leverage, maintain moderate risk exposure, and prepare for potentially sharp market swings.

Furthermore, the "fear of missing out" (FOMO) sentiment often spreads rapidly during bull markets, leading investors to chase prices at market peaks, ultimately facing significant price correction risks. Blindly following the herd and emotional trading are common investment pitfalls in the cryptocurrency market. Investors should remain rational, base their investment decisions on fundamentals, and avoid the trap of buying high and selling low.

Renowned economist Pan Helin also points out that Bitcoin, as a highly speculative asset, experiences dramatic price volatility, capable of both rapid ascents and descents. This "hot potato" investment approach, while alluring, is unsuitable for ordinary investors. Retail investors should proceed cautiously, avoid blindly following trends, and prevent suffering significant losses due to a lack of expertise and risk awareness.

Rational Investment, Risk Mitigation

Bitcoin's continued rise presents significant allure for investors, but equally substantial risks remain. When participating in Bitcoin investment, individuals must remain rational, avoiding excessive risk-taking and emotional trading. High-leverage trading, while potentially yielding high short-term returns, can also lead to severe losses. Investors should carefully assess their risk tolerance, avoid using high leverage, closely monitor market dynamics, and adjust their investment strategies promptly.

Moreover, investors should enhance their knowledge and understanding of blockchain technology and cryptocurrency markets to mitigate the risks associated with blind following and information asymmetry. During the investment process, they should adhere to a long-term investment philosophy, not be swayed by short-term price fluctuations, and develop a sound risk management strategy to prevent forced liquidation during market volatility. Only by fully understanding market risks can rational and cautious investment decisions be made to achieve long-term and stable returns in the cryptocurrency market. Remember, investing involves risks; enter the market with caution. All investment decisions should be based on one's own risk tolerance and in-depth research of market trends, rather than blindly following market sentiment or others' advice.