Bitcoin prices reached a new peak this week as multiple factors fueled gains

Bitcoin prices rose to an all-time high during the week through Friday, December 20, as multiple variables, including some notable government developments, caused the digital currency to experience some compelling upside.

The world’s most popular cryptocurrency reached consecutive highs on Monday, December 16 and Tuesday, December 17, surpassing $107,000 on the former and $108,000 on the latter, according to Coinbase data from TradingView.

After rising to these levels, the digital asset gave up some of its gains, suffered repeated pullbacks and fell to nearly $92,000 on Friday, December 20, additional Coinbase numbers provided by TradingView revealed.

Several analysts offered their view on what led to these sharp price movements, including Alex Lin, co-founder and general partner at the venture capital firm. Paraphrasewhich focuses on investments in blockchain and frontier technology.

He said: “Bitcoin’s rise to an all-time high of over $108,000 was driven by a combination of factors that began early last week with expectations of interest rate cuts by the Federal Reserve and continued strong market sentiment in favor of the asset after it crossed the psychological threshold of $100,000. Via email.

“This momentum was further supported by the decline in Bitcoin supply on exchanges reported earlier this month, indicating that investors were moving their Bitcoins into personal custody, resulting in a lower supply available for exchange,” Lin said. “Increasing demand and increasing scarcity.”

He continued: “As BTC approached and later surpassed previous highs through this week, short positions were squeezed, resulting in additional buying pressure as those short had to cover their positions.”

“However, the all-time high was short-lived as the interest rate cuts announced by the Fed on Wednesday were lower than expected,” Lane said, referring to the FOMC decision. advertisementreleased on December 18, indicated that the group of policymakers had chosen to lower the target range for the federal funds rate by 25 basis points.

“The hawkish stance and dovish monetary policy stimulated a Bitcoin sell-off, followed by significant liquidations in the derivatives market, which exacerbated the price decline as positions were forcefully closed,” he added.

Brady Swenson, co-founder of Swan Bitcoinalso participated via email, offering his thoughts on the price drop that Bitcoin saw later in the week.

“Bitcoin’s price decline is more likely to be related to Fed Chair Jerome Powell’s recent comments suggesting fewer interest rate cuts in 2025 than the lockdown drama,” he said, referring to Powell’s press conference on Wednesday, December 18, In addition to the press conference held by Powell on Wednesday, December 18, in addition to a press conference. A potential government shutdown that lawmakers were able to avert on Friday, December 20.

However, these developments make digital assets look more attractive, Swenson claimed.

“The looming government shutdown and change of course with monetary policy underscore the appeal of transparent, code-based Bitcoin policies, in contrast to the often arcane and confusing process of building human consensus on key monetary and financial decisions,” he stated.

Greg Magadini, Director of Derivatives at Digital Asset Data Provider Amberdataalso commented on the price declines seen in Bitcoin after hitting highs earlier in the week.

“With markets at all-time highs, relatively strong CPI numbers last week, and a strong labor market, the Fed lowered its guidance on 2025 rate cuts to a more hawkish tone,” he wrote via email on Friday, December 20.

Magadini stressed that after the recent US elections, long exposure to cryptocurrency markets significantly outweighed short exposure, creating an environment that made it much easier to achieve a pullback “as investors reevaluate the US interest rate landscape and the US dollar strengthens.”

Going forward, Bitcoin is in a position to appreciate, Tim Enneking, Managing Partner of psalmhe said via email comments.

“Going back to the 1990s, the theater is now well prepared for another step,” he said.

“The correlation with fiat assets ‘risk’ will still be higher than the crypto ecosystem would like, but cryptocurrencies operate 24/7 and fiat markets are open at about 20% of that, so crypto traders will still have plenty of room to run,” Enking said.

Disclosure: I own some Bitcoin, Bitcoin Cash, Litecoin, Ether, EOS, and SOL.