- Bitcoin price has surged hard in the past few months.
- The coin has jumped as investors react to the latest US inflation data.
- Analysts expect that Bitcoin and MicroStrategy stock will continue surging.
Bitcoin price has done well in 2023, helped by the ongoing supportive environment. After bottoming at $15,000 in 2022, Bitcoin has now surged to over $36,000. While it has eased a bit, it remains up by over 100% this year.
Bitcoin surge explained
It is clear to see why Bitcoin price has surged this year. From a macro perspective, inflation has dropped from a multi-decade high of over 10% to 3.2%. This decline happened as the Federal Reserve hiked interest rates from zero to between 5.25% and 5.50%.
There are signs that US inflation will continue falling in the coming months. For one, the price of crude oil has crashed from the year-to-date high of $95 to about $80. Gasoline prices have crashed to about $3.5.
Therefore, there is a likelihood that the Federal Reserve will not hike rates again. Indeed, analysts at UBS now believe that the Fed will deliver several rate cuts in the coming months in a bid to support the slowing economy.
Recent data proved that this slowdown is happening. For one, the unemployment rate has jumped to 3.9% while wage growth and labor participation have retreated in the past few months.
Bitcoin has also jumped because of the recent decision by companies like Blackrock, Franklin Templeton, Invesco, and Ark Invest to file for a Bitcoin ETF. In a recent statement, Blackrock’s Larry Fink said that he was seeing unprecedented demand for a Bitcoin ETF from institutional investors.
He also argued that Bitcoin was being seen as a safe haven and a digital version of gold. This is notable since Blackrock is the biggest asset management company in the world with over $9 trillion in assets.
Bitcoin supply challenges
In a tweet, Mike Alfred, a highly-followed analyst, also explained why he believes that the world is expected to see an “extreme systematic supply crisis”. For one, over 19.5 million Bitcoins have already been mined. Of these, almost five million coins have been permanently lost. This means that there are less than 1.5 million Bitcoins yet to be mined.
At the same time, the volume of Bitcoins in exchanges has crashed to the lowest level in over five years. Most importantly, there are signs that long-term Bitcoin holders are not selling.
Further, a Bitcoin halving is set to happen. Halving is a situation where the Bitcoin mining rewards are cut into half. This means that the volume of new coins is set to be slashed into half in April of next year.
All this will happen at a time when companies like Blackrock and Franklin Templeton are filing for a spot Bitcoin ETF. These ETFs will likely lead to more BTC demand in the coming months at a time when supply is falling.
Further, these moves will then lead to more demand for MicroStrategy stock. MicroStrategy is the biggest holder of Bitcoin. Indeed, some investors invest in MSTR because, unlike Bitcoin ETFs, it has no expense ratio.
Therefore, there is a likelihood that the MicroStrategy share price will continue soaring in the coming months. As shown below, MSTR tends to do better than Bitcoin when the latter is surging.
