Bitcoin sets a new all-time high at $87k. What is driving the momentum?

by Solomon Victor

Bitcoin (BTC) has reached a new all-time high (ATH) of $87,000, fueled by a bull market and institutional support. With a market capitalization of $1.7 trillion, BTC price aims to cross $90,000. The dominant cryptocurrency’s open interest has risen 2.59% to $49.06 billion, indicating extreme bullish sentiment.

BTC’s daily chart reveals a significant breakout from a falling channel, marking a flag pattern within the 2024 bull run. This breakout triggered a post-retest reversal from the 78.60% Fibonacci retracement level of $67,690. The reversal sparked a substantial 20% price surge.

In this article, I analyze the factors driving BTC’s ATH and market sentiment

Historical Context

Before BTC’s latest record-breaker, the cryptocurrency had already reached great heights. Let’s revisit its past ATHs, exploring the market dynamics, global events, and regulatory shifts that propelled BTC to unprecedented valuations.

Early Years (2009–2015)

BTC launched in 2009 with no initial value. Its first significant price surge occurred in October 2010, reaching $0.30. By 2011, BTC hit $29.60, followed by a sharp decline. It regained momentum in 2013, crossing $1,000.

Expansion and Volatility (2016-2020)

BTC price climbed to $900 in 2016. The cryptocurrency skyrocketed to $19,188 in December 2017. After a sideways movement in 2018–2019, BTC surged to $28,993 by December 2020, driven by pandemic-induced economic uncertainty.

Institutional Investment and All-Time Highs (2021–2023)

BTC reached $64,895 in April 2021, driven by institutional interest. Prices fluctuated, hitting $69,000 in November 2021. After declining to $16,530 in January 2023, BTC rebounded to $42,258 by year-end.

Regulatory Approvals and Continued Volatility (2024)

The SEC’s approval of Bitcoin Spot ETFs in January 2024 sparked a price surge.

BTC breached $60,000 in March and reached $76,999 on 7 November 2024. BTC crossed $80,000 on November 10, driven by investor enthusiasm.

Current Market Outlook

Analysts predict a potential minor pullback to $80,000, but technical indicators signal further upside. The 100-day and 200-day Simple Moving Averages (SMAs) suggest a positive crossover, while the MACD confirms a “BUY” signal.

Institutional support, including potential US Bitcoin Spot ETFs, may fuel further growth. Bitcoin’s price may reach $94,119 by year-end, driven by its strong momentum.

Key Drivers of Previous ATHs

First, BTC price is significantly influenced by economic factors, particularly supply and demand dynamics. BTC’s limited supply of 21 million units contributes to price increases as demand rises. When demand exceeds available supply, prices surge, and vice versa. Market sentiment, driven by investor enthusiasm, speculation and emotional responses, also plays a crucial role in price fluctuations.

Second, global economic conditions, such as inflation, interest rates and economic uncertainty, impact BTC’s value. During periods of economic turmoil, investors often seek safe-haven assets like BTC, driving up demand and prices. Conversely, economic stability can lead to decreased demand and lower prices.

Third, regulatory environments significantly impact BTC price. Government policies, ranging from approvals to bans, influence BTC’s legitimacy and demand. The United States Securities and Exchange Commission’s (U.S SEC) approval of Bitcoin ETFs and investment products, for instance, increases accessibility and demand. Taxation policies have implications for investors, affecting demand. Regulatory clarity and support foster confidence, while restrictive policies dampen enthusiasm. The approval of Spot Bitcoin ETFs in January 2024 exemplifies regulatory influence, sparking a price surge.

Moreover, technological advancements and challenges shape BTC price. Blockchain development, scalability improvements, and security enhancements increase BTC value. Mining difficulty adjustments, which occur every 2016 blocks, impact supply and price. Competition from alternative cryptocurrencies (altcoins) also affects BTC market share. Emerging technologies, like quantum computing, may potentially compromise Bitcoin’s security, influencing investor sentiment. Conversely, innovations like Lightning Network and SegWit upgrades boost efficiency and adoption.

Finally, social dynamics significantly influence BTC price. Growing adoption as a payment method increases demand. Mainstream acceptance, partnerships and integrations with major companies enhance legitimacy. Media coverage, both positive and negative, shapes public perception. Community support, developer activity and conferences foster enthusiasm. Influential figures, like Elon Musk, could significantly impact prices with their endorsements or criticisms. Social media platforms amplify market sentiment, accelerating price movements.

BTC: Current Market Analysis

On-chain metrics provide invaluable insights into BTC’s market sentiment. Network activity, transaction volumes, and address growth indicate increased adoption and demand. Metrics like Bitcoin’s hash rate, which measures computational power, reached ATH, signaling strong network security and validation.

Additionally, the number of active addresses and transaction counts surged, demonstrating heightened user engagement. The Glassnode data revealed a significant increase in “HODLers” (long-term holders), indicating a bullish long-term outlook.

These on-chain metrics collectively pointed to a robust and healthy network.

Social media platforms reflect overwhelmingly positive sentiment. X conversations largely highlight BTC’s potential, with hashtags #Bitcoin and #BTC trending. Reddit’s Bitcoin community saw significant activity, with users discussing Bitcoin’s legitimacy and potential. Sentiment analysis tools, like Santiment and CoinMarketCap’s Sentiment Index, indicate extreme bullishness. Online forums and cryptocurrency-focused websites reinforced optimism. Influencers and thought leaders, such as Michael Saylor and Anthony Pompliano, further amplified positive sentiment.

Also, derivatives markets revealed trader sentiment. Futures markets, like CME and Binance, showed net long positions, indicating bullish expectations. Options markets exhibited skewed call-option buying, suggesting traders anticipated price increases. The Commitment of Traders (CoT) report highlighted hedge funds’ bullish positioning. Leveraged trading platforms, like Bybit and FTX, reported elevated long/short ratios. These indicators collectively signaled traders’ conviction in BTC’s upward trajectory.

Institutional investors are showing optimism too. Fund flows into Bitcoin-focused funds, like Grayscale Bitcoin Trust, reached record highs. Positioning data from CME and Bloomberg revealed institutional investors’ significant long exposure.

Hedge funds, pension funds, and family offices have allocated substantial assets to BTC. The Paul Tudor Jones-endorsed Bitcoin ETF attracted considerable institutional investment. These indicators underscored institutions’ growing confidence in BTC’s legitimacy and potential for growth. MicroStrategy’s bold decision to invest heavily in BTC, starting in 2020 under CEO Michael Saylor, has reshaped corporate finance by embracing a non-traditional approach. By making BTC a central part of its investment strategy, MicroStrategy not only generated substantial profits but also sparked significant market optimism and interest from institutional investors. The success of this strategy demonstrated BTC’s potential as a profitable, long-term asset, leading other companies to follow suit. This growing corporate and institutional adoption has driven up BTC’s value, boosted market confidence, and accelerated its path toward mainstream acceptance.

Implications and Future Outlook

The short-term outlook for BTC appears bullish, driven by institutional investment, regulatory clarity, and technical momentum.

Analysts predict potential price targets between $90,000 and $100,000, citing continued adoption and limited supply. Technical indicators, such as the Relative Strength Index (RSI) and Moving Averages, suggest BTC may experience minor corrections before resuming its uptrend. Traders anticipate potential support levels at $75,000 and $70,000. Short-term volatility will likely remain, driven by market sentiment and geopolitical events.

BTC’s long-term prospects show a probability of a promising future in global finance and economy. As inflation concerns and monetary policy shifts continue, BTC may solidify its position as a hedge asset and store of value. Growing institutional adoption, improving infrastructure, and regulatory frameworks will further legitimize BTC.

Experts envision BTC becoming a mainstream asset class, potentially rivaling traditional safe-havens like gold. Long-term price predictions range from $250,000 to $500,000, driven by increasing global recognition and adoption.

Despite optimistic outlooks, BTC faces significant risks and challenges. Regulatory uncertainty, particularly in jurisdictions like China and India, pose a considerable threat. Technical risks, including quantum computing vulnerabilities and potential 51% attacks, also loom. Market risks, such as whale-induced volatility and liquidity crises, remain concerns.

Also, environmental concerns surrounding BTC’s energy consumption and e-waste generation may impact public perception.

Investors must carefully consider these risks when allocating assets to BTC. To navigate Bitcoin’s volatility, investors should employ diversified strategies. Long-term investors can utilize dollar-cost averaging, while traders can leverage technical analysis and risk-management techniques.

Solomon Victor is a Technical Analyst who is also knowledgeable about various aspects of blockchain and cryptocurrency.