As Bitcoin reached the $68,000 level, many were quick to link this rise to President Biden's announcement that he would not run for re-election. But this simplistic view by analysts ignores critical factors for Bitcoin. Biden's exit is less important than many think.
Halving cycle
Historically, the quadrennial halving cycle has been the main driver of Bitcoin's price movement. We are done with the halving in 2024, which is usually followed by big upside waves. This cyclical pattern continued regardless of political changes. In fact, the previous three cycles saw spikes of 8,000%, 4,000%, and 20,000% respectively after each halving event.
Continued institutional adoption
The approval of Bitcoin exchange-traded funds (ETFs) in the United States has opened wide doors for institutional investment. With net inflows of $17 billion, these trends show no signs of slowing, regardless of who occupies the White House. In fact, it is estimated that institutional investments in Bitcoin could reach $100 billion by the end of 2024.
Global economic factors
A surprise interest rate cut in China and ongoing concerns about inflation in various economies have increased the appeal of Bitcoin as a hedge. These macroeconomic trends extend beyond US politics. For example, global inflation rose from 3.2% in 2020 to 8.8% in 2022, boosting demand for limited assets like Bitcoin.
technological improvement
The continued development of Layer 2 solutions and the growth of the Lightning Network are enhancing the utility of Bitcoin. These improvements occur independently of political events. For example, the number of active channels on the Lightning Network grew by 300% in the past year, indicating a significant improvement in scalability.
Market maturity
As the cryptocurrency market matures, it becomes less reactive to individual events or personalities. The decline in volatility in recent years indicates a more stable and resilient market. Bitcoin's average daily volatility decreased from 3.5% in 2017 to 1.7% in 2023, indicating increased stability.
Cryptocurrency analyst Saif Abu Srour notes: While political events may cause short-term price fluctuations, they rarely affect Bitcoin's long-term trajectory. Traders who focus only on political news may miss the most important market drivers.
For traders:
Focus on the basics: Pay more attention to adoption rates and technological developments.
Think Globally: Remember, Bitcoin is global. Do not overweight American political events in your analysis.
Understanding Market Cycles: Learn about Bitcoin's historical patterns, especially around halving events.
Monitor Institutional Moves: Watch ETF flows and corporate treasury allocations as indicators of ongoing demand.
Staying Technologically Informed: Developments in the Bitcoin protocol and ecosystem may have more lasting effects than political shifts.
“The real story here is not about Biden or any single political figure,” says blockchain researcher Saif Abu Srour. “It is about Bitcoin’s growing role in the global financial system, driven by technological innovation and changing economic realities.”
By focusing on these fundamental factors rather than political headlines, traders can develop more robust, long-term strategies. While it is tempting to draw connections between political events and market movements, the Bitcoin story is much bigger than any single administration or political shift.
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