Is the crypto winter over? Bitcoin's price jumps past $50,000 for first time in 2 years

Bitcoin (BTC) surged above $50,000 on Monday for the first time since December 2021, marking a significant milestone in its recovery trajectory. While at the time of writing on Tuesday, 13 February, the world's first cryptocurrency had dipped to just over $49,000, analysts are optimistic about its potential to continue climbing, with some suggesting a target of $52,000 in the near term. 

This surge in Bitcoin's price was largely attributed to strong inflows into spot Bitcoin ETFs, which garnered over $1.1 billion in new net funds last week. This influx of capital, coupled with diminishing outflows from established funds like the Grayscale Bitcoin Trust (GBTC) and ProShares' futures-based ETF (BITO), has buoyed market sentiment. The recent rise signifies a shift into the FOMO (Fear Of Missing Out) phase of the BTC bull market, which began in January 2023.

Despite initial concerns surrounding the launch of spot ETFs on 11 January, which saw Bitcoin's price drop to as low as $38,500, investor attention has shifted from the high-fee Grayscale Bitcoin Trust (GBTC) to the newer, more accessible ETFs. In recent weeks, outflows from GBTC have slowed while substantial inflows have been observed in competing products.

The culmination of these factors has propelled Bitcoin's price above $50,000, a level not seen in over two years. Following this increase, Bitcoin's market capitalisation surged to $982 billion, positioning it as one of the world's top ten most valuable assets, lagging behind Meta, the parent company of Facebook, by approximately $235 billion in terms of market capitalisation. If Bitcoin can continue to rise past Meta, it can challenge titans such as Amazon and Alphabet, Google's parent company.

What's behind the crypto rally?

This milestone reversal for BTC is lifting up the wider crypto market, with many altcoins also experiencing gains, following the market leader. This positive trend for crypto prices comes after a tumultuous period in 2022, marked by various setbacks within the crypto industry alongside regulatory challenges. The extended 'crypto winter' exerted a dampening influence on the crypto market as a whole, but it certainly seems that spring has come at last.

Despite crypto industry troubles, Bitcoin's price has steadily climbed throughout 2023, with a notable surge in the final quarter amid growing confidence in the approval of spot Bitcoin ETFs by the SEC. This optimism drove Bitcoin's price up by nearly 60% in the last three months of 2023, closing the year above $42,000 and signalling a renewed bullish sentiment in the market.

Spot ETFs aren't the only factor behind this week's crypto rally. Increased accumulation is also a driving force behind Bitcoin's recent surge as hodlers bolster their BTC wallets in anticipation of future increases in value ahead of the halving event scheduled for April. After the halving, rewards for Bitcoin miners will be reduced by 50%, decreasing supply just as spot ETFs are increasing demand from institutional investors. Other factors fuelling BTC accumulation include the expectations of capital injections in China to stabilise its stock market and the anticipation of currency depreciation in developed countries.

Ethereum and altcoins ride the wave

Meanwhile, Ethereum (ETH) has also experienced a notable rally, surpassing $2,600 amid news of asset manager Franklin Templeton filing for a spot Ethereum ETF. This development underscores the growing institutional interest in cryptocurrencies beyond Bitcoin. Additionally, Ethereum's rise has positively impacted native tokens of layer 2 networks like Immutable X (IMX), Optimism (OP), and liquid staking platform Lido's token (LDO), which have seen significant gains. Special mention must also go to Solana (SOL), the 'Ethereum killer', which jumped 8% following Bitcoin's rally.

Etherum's bullish momentum is supported by factors such as an increased validator queue, a yearly-high total value locked (TVL), and high weekly fees. Data from ValidatorQueue reveals that Ethereum's validator queue reached 7,045, the highest since October 2023, with the number of active validators hitting an all-time high of 936,838. Additionally, Ethereum's TVL peaked at $23.30 billion, indicating increased liquidity and capital locked in smart contracts, while rising fee revenue, surpassing $84 million in the past week, suggests heightened network utilisation and profitability. Apart from Bitcoin, Ethereum is the only other cryptocurrency represented in the top 100 of the world's most valuable assets, now pushing ahead of big brands such as Nestle and Toyota.

How far will the Bitcoin rally go?

Even in the short term, before the halving, the bulls are ready to charge for Bitcoin. One popular prediction comes from Markus Thielen of 10x Research, who suggested that Bitcoin's breakout above $48,000 signals a potential rally toward $52,000 in the short term. Historical price patterns indicate that such breakouts typically lead to an average rally of 8% in two weeks. Thielen believes that momentum is building on the bullish side, increasing the probability of Bitcoin reaching the $52,000 target sooner rather than later.

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Curiously, data from Google trends does not show a significantly higher interest in worldwide searches for Bitcoin, even with the bullish recovery ongoing and the potential profits to be made. This is a sign that retail traders may be missing out on gains while institutional investors are raking in all the profits—don't let that be you! 

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