Future of Bitcoin Price

12 Ağustos 2024

Today market comment on behalf of Rania Gule, Senior Market Analyst at XS.com

Future of Bitcoin Price: Can Chinese and Russian Liquidity Boost Bitcoin’s Value?

Bitcoin (BTC) managed to recover most of its weekly losses after the gains it recorded last Thursday, starting Monday’s trading at $58,591. However, in my view, it hasn’t fully overcome the crisis. After a week of significant fluctuations, Bitcoin tested a critical level following its drop below $50,000 last Monday.

China is preparing to inject substantial liquidity into its economy, which could boost Bitcoin and other cryptocurrencies. The People’s Bank of China is known for increasing liquidity in August, as seen from previous injections on August 11, 2020; August 31, 2021; 2022; and August 28, 2023. Despite a modest liquidity increase in June, there has been little notable activity in the markets. I believe the People’s Bank of China might wait for the Federal Reserve to cut interest rates, possibly on September 18, before injecting liquidity, which could lead to increased global liquidity and rising prices.

Geopolitical developments also play a role in shaping the market. Russian President Putin recently signed a law legalizing Bitcoin and cryptocurrency mining, reflecting Russia’s attempt to keep pace with the United States in mining activities. China currently controls 57% of global Bitcoin mining, while the United States controls 35%. These moves are contributing to market support and a potential rise in Bitcoin’s price in the medium and long term, despite recent declines, challenging the expectations of a major bearish market or collapse.

In my opinion, Bitcoin is currently in a typical consolidation phase following the halving event, a pattern that usually precedes a significant price increase. Along with the anticipated liquidity injection from China, the market seems poised for a potential rise. Data from Bitcoin holdings on the blockchain indicates little movement, reflecting accumulation, a stage that often precedes major market upswings.

Over the past month, starting from July 12, 2024, 99,308 BTC worth $5.96 billion were withdrawn from exchanges. Currently, central exchanges hold 2,679,880 BTC, approximately valued at $161 billion based on Bitcoin prices as of August 12. These figures suggest that reserves have reached their lowest level since the Bitcoin price drop on November 19, 2018.

Bitcoin: Exchange Reserve – All Exchanges 12.8.2024

Since then, Bitcoin reserves on exchanges peaked at an all-time high of 3,374,491 BTC on July 23, 2021, before gradually declining to 3,356,772 BTC on June 6, 2022. Following the collapse of Terra and FTX, reserves dropped by 20.16% and have currently stabilized at 2.77 million BTC.

In my view, the continued decline in Bitcoin and Ethereum reserves on central exchanges reflects a user preference for non-custodial solutions, which is a positive development for security and scarcity. As security becomes a higher priority, cryptocurrencies like Bitcoin become less liquid on exchanges, thereby enhancing their scarcity and value over time. This trend supports the principles of self-custody and decentralized finance (DeFi), providing significant support for Bitcoin’s price in the long term.

This period could also present a good opportunity for Bitcoin investors to capitalize on the current market conditions. With the anticipated liquidity injection from China, the increasing global recognition of Bitcoin as a crucial investment asset, and the new Russian agreement, all point to the potential for Bitcoin’s value to rise in the future. The expected increase in global liquidity, combined with the reduction in reserves on exchanges, could put Bitcoin in a very favourable position for value appreciation, making it an attractive long-term investment.

 

Zaid Barem / YMM