Bitcoin’s Surge Against the US Dollar Explained

Default Profile ImageBen O'Connell
Bitcoin's Surge Against the US Dollar

The price of bitcoin is reaching a new peak. The largest cryptocurrency worldwide reached a record of US $69,202 – which is NZ $113,770 per coin.

It comes as investors flood money into bitcoin exchange-traded funds (ETFs) on the belief that global interest rates may soon fall. 

The recent move in the United States to allow exchange-traded funds, allowing the world’s most prominent fund managers to buy bitcoin, kicks off a fierce race for market share.

Bitcoin is the biggest player in the cryptocurrency market, currently valued at a whopping $1.3 trillion out of a market total of $2.6 trillion. 

What is Bitcoin?

 What is Bitcoin

Bitcoin is a decentralised digital currency created in 2009 by an unknown person or group using the pseudonym Satoshi Nakamoto. 

It operates on a peer-to-peer network, allowing users to transact directly without the need for intermediaries like banks. 

Bitcoin’s supply is capped at 21 million coins, a feature that aims to mimic the scarcity of precious metals like gold. This limited supply prevents inflation and contributes to the cryptocurrency’s value over time.

Bitcoin is built on blockchain technology, a public ledger that records all transactions across a network of computers. 

This technology ensures the security and integrity of transaction data, making Bitcoin a secure and transparent way to transfer value.

While Bitcoin transactions are recorded on the blockchain and visible to anyone, the parties’ identities are encrypted with unique public keys. 

This provides anonymity, though not total privacy, as transactions can be traced back to individuals through sophisticated analysis.

A single Bitcoin can be divided into smaller units, with the smallest unit being called a “satoshi” (named after Bitcoin’s creator), worth one hundred millionths of a Bitcoin. This divisibility makes Bitcoin suitable for microtransactions.

Bitcoin can be sent anywhere in the world, usually within minutes, regardless of the amount or the destination. 

This makes it an attractive option for international money transfers, bypassing the need for currency exchange and the fees associated with traditional banking methods.

Bitcoin’s value is determined by supply and demand dynamics in the market, similar to stocks and commodities. 

Its price can be highly volatile, influenced by factors such as regulatory developments, market sentiment, and technological advancements in the blockchain space.

Since its inception, Bitcoin has inspired thousands of other cryptocurrencies, collectively known as altcoins (alternative coins), each with unique features and use cases. 

Bitcoin remains the most recognised and widely used cryptocurrency. It is often called digital gold and is considered by many to be a store of value and a hedge against inflation.

Future Projections

The future of Bitcoin is a hot topic, with predictions ranging from very optimistic to quite cautious. 

Some analysts believe Bitcoin’s value will surge due to its limited supply and growing popularity among large institutions. Others fear its volatility and potential for regulation could lead to price drops. 

Ultimately, the future is uncertain and will depend on factors like technological advancements, global economic changes, and regulations.

Several upcoming events could significantly impact Bitcoin’s price in 2024. The halving event, which cuts Bitcoin rewards in half every four years, is expected to occur in mid-April. Historically, this event has been followed by price increases. 

Additionally, approving Spot Bitcoin ETFs, which allow more accessible investment in Bitcoin, could attract more institutional and retail investors.

Bitcoin price predictions for 2024 and beyond vary widely. In USD, some analysts predict a rise to $120,000 by the end of the year, while others envision a range including $130,000. 

Even more far-out predictions suggest a price tag of $1 million in the distant future. It’s important to remember that the cryptocurrency market is highly volatile, and these are just predictions. 

Investors should proceed with caution due to the speculative nature of Bitcoin and the potential for significant price fluctuations.