In a striking manner, the largest cryptocurrency Bitcoin (BTC) has risen by an astonishing rate of 160% since the beginning of 2023, defying the major downtrend of 2022. With this rise, its market value increased by over 500 billion dollars. This surprise rally not only lifted BTC but also revitalized the rest of the cryptocurrency market. The fundamental behind this strong rise is the interest shown by institutional investors in the market.

Bitcoin Shows Resilience Despite Adversities

Amid ongoing doubts and regulatory issues, the cryptocurrency world faces an unprecedented revival driven by optimism that the U.S. Securities and Exchange Commission (SEC) will greenlight a spot Bitcoin ETF. According to a recent report by Bloomberg, Michael Saylor, the co-founder of MicroStrategy, which is the largest institutional Bitcoin investor, sees this approval as a major driving force offering a new path for mainstream investors.

Saylor emphasized the importance of greenlighting spot ETFs for Bitcoin and mentioned that ETFs could serve as a catalyst for Bitcoin and could lead to a significant increase in demand. Saylor’s optimism is based on the belief that current limitations on mainstream adoption, especially for Bitcoin, which has high bandwidth characteristics, lack a strong and compatible investment channel. The general expectation in the market is that the approval of spot ETFs will bridge this gap and potentially increase demand for the largest cryptocurrency. Additionally, speculations regarding the block reward halving expected to occur in April 2024 are also fueling investor sentiment.

Furthermore, the shift from a hawkish to a dovish stance by the U.S. Federal Reserve (Fed) and cooling inflation in the country have also contributed to increased market optimism. A recent report by the U.S. Department of Commerce reveals that the core PCE inflation data, excluding volatile food and energy prices, increased by 0.1% monthly and 3.2% annually. Over the last six months, the PCE inflation data has been calculated at 1.9%. This downward trend is significant as it confirms the approach to the Fed’s long-standing inflation target of 2% and will enable the start of interest rate cuts and monetary expansion.

On the other hand, recent U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) data also indicate that inflation is cooling in the U.S. and expectations are growing that the Fed will start cutting policy rates much earlier than expected in 2024.

Bitcoin’s Market Value Surpasses 500 Billion Dollars

At the time of writing this article, Bitcoin’s price has seen a slight decrease of 0.24% in the last 24 hours, trading at $43,606, while its trading volume has decreased by 28.92% to $17.38 billion. Data shows that the largest cryptocurrency has risen over 16% in the monthly timeframe and around 160% annually. Bitcoin’s market value has increased by over 530 billion dollars since the first day of the year, exceeding 850 billion dollars.

Despite the ongoing significant rise, Bitcoin and the rest of the cryptocurrency market face serious challenges. The 4.3 billion dollar fine imposed by U.S. authorities on the world’s largest cryptocurrency exchange Binance and legal issues faced by industry figures like Sam Bankman-Fried, the founder and former CEO of FTX, have left lasting marks on the market. Moreover, market depth, a measure of the market’s ability to process large orders without significant price effects, has also decreased. This decline indicates some issues in smooth trading.

However, on the Bitcoin derivatives side, open interest in both options and futures markets has increased throughout the year, reaching record levels. This growing interest has also reflected in the decentralized finance (DeFi) sector, with liquid DeFi protocols reaching new peaks and becoming the target of investors seeking easier access to crypto-denominated rewards offered on Blockchains.