In 2009, with the advent of Bitcoin, the perception of money changed forever. For the first time, money operated outside the control of traditional financial institutions, allowing individuals to retain complete control. Users can send and receive value through a peer-to-peer electronic cash system. Not only are transactions faster but also cheaper and more accessible, especially when it comes to international transfers. Bitcoin added a new dimension to the function of money – speculation. The possibility of a major gain or another recompense offsets the risk of loss.
Bitcoin is fairly volatile, which means it experiences strong price fluctuations over time. This has decisive effects on investors and the market as a whole. Between 2010 and 2017, Bitcoin endured volatility that would make even the most seasoned traders nervous. Throughout this period, annualized volatility routinely exceeded 200%, sometimes escalating to over 400%. Between 2018 and 2020, volatility ranged between 50% and 150%. Bitcoin’s volatility has continued to decline, now ranging between 30% and 80%. Volatility plays an essential role in the Bitcoin price USD dynamics, as it reflects and influences market behavior.
Rekt Capital Notes That Bitcoin Demonstrates Strong Bullish Momentum
Rekt Capital, a cryptocurrency analyst who shares macro research, commentary, and technical analysis, is optimistic about Bitcoin’s price increasing in the future. According to the pseudo-anonymous trader, Bitcoin appears to be at the beginning of a price discovery phase, entering uncharted territory. For investors, this carries both promise and risk. The high volatility presents opportunities for profit but also exposes traders to potentially significant losses. Rekt Capital proclaims that Bitcoin closing above $104,400 may be the key indicator that the demand zone has been successfully retested and the asset is preparing for a move higher.
What Is Price Discovery? How Does It Drive Market Value?
Cryptocurrencies arrive at their value via a process shaped by the interaction of buyers, sellers, and market dynamics. Price discovery can occur across different exchanges with notably different structures. Centralized exchanges (CEXs) are organized like traditional limit order books, whereas decentralized exchanges (DEXs) operate on blockchains using smart contracts and set up prices algorithmically. These market structures offer varying degrees of security, speed of execution, transparency, and trading costs. Both market orders in the CEX and swaps in the DEX contribute to price discovery.
The key factors that influence price in any market are supply and demand. Still, the collective mood/attitude of investors and traders towards a cryptocurrency can affect its value – optimistic sentiment can push prices higher, while pessimistic sentiment can lead to a decline. The market is in a period of determining its true or intrinsic value. The volume of a cryptocurrency traded on exchanges is an indicator of its liquidity and market activity. The ease of trading is crucial because it lowers transaction costs and reduces market friction, allowing for more rapid adjustments to prices.
In November 2024, Bitcoin Experienced A Rally That Propelled Its Value By 56%
Bitcoin was valued at $45,000 at the beginning of 2024, but in November, it reached an all-time high of $95,000, which can be attributed to the victory of President Donald Trump in the U.S. general election. His campaign statements emphasized making America a global leader in cryptocurrencies, including potentially keeping part of the country’s banking reserves in Bitcoin. In November 2024, Bitcoin entered a period of price discovery evocative of rises witnessed during past acceleration phases, defined by high volatility and high profit.
By November 2024, cumulative inflows into spot Bitcoin ETFs had surpassed $4.5 billion, with newly introduced financial products attracting billions in net assets within weeks of launch. Bitcoin has a maximum supply embedded in its design – i.e., 21 million coins – and it’s believed it will run out by 2040 despite more powerful mining equipment. There’s also been a surge in institutional interest in Bitcoin. MicroStrategy and other institutional investors purchased large amounts of Bitcoin in 2024, further reducing the available supply on exchanges.
Bitcoin Currently Exhibits Textbook Acceleration Phase Behavior
According to Fidelity Digital Assets, Bitcoin is still in an acceleration phase, which typically results in major profits for long-term investors. Although Bitcoin flaunted weak performance in the first quarter of 2025, it can reproduce previous bull market behavior. The cryptocurrency market is renowned for being extremely volatile, and price corrections create favorable conditions for future growth.
Historically, acceleration phases follow periods of sideway movements. Bitcoin moves from a phase of uncertainty to one where rapid growth and momentum dominate the narrative. What remains to be seen is if it follows historical trends.
What Are The Factors That Could Change How Market Prices Are Set?
Supply and demand are obviously the most critical factors that determine price discovery. Undoubtedly, there are other aspects that influence the final price of Bitcoin, namely:
- The evolving regulatory landscape: Clear regulation builds confidence among investors. The Securities and Exchange Commission is currently working on an exemption to encourage the creation of more on-chain products and services. It would relieve firms from the tech sector from specific regulatory requirements. You should stay tuned as the industry matures and policy frameworks continue to change.
- Macroeconomic factors: The world economy is currently experiencing a period of inflation, with rates remaining elevated but gradually moderating. Bitcoin tends to appreciate against inflation, confirming its status as digital gold. Its scarcity makes it an appealing store of value. Equally, Bitcoin’s performance is inversely related to changes in the U.S. dollar, so it can help with de-dollarization.
- Technological advancements: Innovations in market technology, such as enhanced exchange platforms or advanced on-chain analytics, lead to a faster process of price adjustment. Advances in cybersecurity and cryptography bolster resilience against fraud, encouraging broader participation. If more investors enter the market, liquidity increases, which contributes to a more dynamic price discovery process.
If Bitcoin fails to establish new highs soon, this could lead to bearish divergences.
Final Words
Bitcoin’s price could rise further due to positive political momentum, social media hype, and the prospects of it becoming a strategic reserve asset in the U.S. However, it’s important to understand that price discovery is susceptible to factors that can lead to overreactions and corrections, which can create market instability.
