In Brief
Since 2023, the crypto market has experienced a steady recovery following a crypto winter that began in late 2021 followed by worsened macroeconomic conditions. So far, 2024 has been a busy year for crypto, with the price of bitcoin rising to an all-time high of more than $70,000 USD.
The price of crypto assets has steadily risen for various reasons, including the approval of spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) in January this year, and the upcoming Bitcoin halving, which has historically been followed by a crypto bull market.
In this guide, we’ll examine the factors influencing the market to explain why crypto is going up. However, this guide does not constitute investment advice and is purely for informational purposes only.
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Note: This article is written at a time when crypto prices are generally increasing month-over-month. However, please note that crypto markets can be volatile and prices can fluctuate up or down at any time. This article is for informational purposes only and is not financial advice or an endorsement of any crypto asset.
Market Sentiment and Investor Behavior
A key question in the minds of many people right now is: why is crypto going up?
The crypto market has been experiencing very positive market sentiment.
Data from Alternative, a website that tracks the ‘emotions and sentiments’ around digital currencies, shows that the crypto market Fear and Greed Index is in the ‘Extreme Greed’ zone at the time of writing.
Just last October, it was near the ‘Fear’ zone.
With the price of bitcoin trading at over $70,000 on March 8, this rapid surge has been influenced by increased interest from investors in Bitcoin Spot ETFs. This has resulted in more money entering the BTC market and increasing the price of bitcoin.
Besides the ETF inflows, BTC prices have also experienced a surge, given the much-awaited Bitcoin halving event, which is estimated to happen in April 2024. While opinions still vary, Bitcoin halving events have historically been linked with price increases.
Ethereum (ETH), the second-largest crypto asset by market capitalization, has also experienced a surge in its price to trade at over $3,800 since its last highest level in January 2022. In an almost similar manner to the price of bitcoin, ETH’s price rally is linked to its much-anticipated Dencun upgrade, which is expected to happen in March 2024, among other factors.
Positive market sentiment plays a vital role in driving the demand for crypto. When the market sentiment is bullish, investors are prone to buying crypto, resulting in an upward price trajectory, which, in turn, forces more people to start buying and propelling prices even higher. Much of that boils down to fear of missing out and greed, two significant drivers of investor behavior. On the contrary, when the prices of bitcoin and other crypto assets start to decline, investors become fearful and panic sell, which causes the prices to tumble.
Besides market sentiment and investor behavior, crypto news is another factor that causes the price of crypto assets to rise. For instance, after the SEC approved spot Bitcoin ETFs in January 2024, major news outlets increased coverage of crypto news, which resulted in the price of bitcoin and other crypto assets soaring.
Bitcoin ETFs: Helping to Drive Mainstream Adoption
Bitcoin ETFs are regulated investment vehicles that enable investors of all kinds to get exposure to the price movements of bitcoin without the need to hold BTC.
Bitcoin ETFs help to bridge the gap between traditional finance and BTC in several ways.
For instance, a Bitcoin ETF can help lower the entry barrier for non-native BTC investors who aren’t familiar with bitcoin trading and holding but are keen on investing in this cryptocurrency.
Moreover, Bitcoin ETFs can attract traditional investors who want a familiar investment instrument that’s regulated. A surge in new traders can result in increased cash inflows into the crypto space and crypto adoption, boosting investor confidence and increasing the price of bitcoin.
Bitcoin ETFs have partly contributed to bitcoin’s price growth. Since their approval early this year, Bitcoin ETFs have performed extremely well, with inflows of funds breaking ETF records. According to data compiled by Eric Balchunas, Bloomberg’s Senior ETF Analyst, the ten Bitcoin Spot ETFs generated $10 billion in daily trading volumes this week, surpassing last week’s record.
Ark Invest and 21Shares' ARKB, BlackRock's IBIT, Bitwise's BITB, and Fidelity's FBTC have all broken their personal volume records, with IBIT surpassing its record by more than the other Bitcoin ETFs.
Although Bitcoin ETFs have been breaking records, it’s important to note that nothing like this has ever happened in the cryptoasset space, as Bitcoin ETFs are barely two months old. Ergo, such high trading volumes and inflows into Bitcoin Spot ETFs might be causing people to speculate, which is driving the record-high numbers.
The Rise of Meme Coins and AI-Driven Cryptocurrencies
A meme coin is a type of cryptocurrency developed based on a trending meme with a comedic trait that pays homage to internet culture to gain popularity and traction while AI-driven crypto coins are used to power blockchain platforms that have integrated artificial intelligence.
Meme coins like Bonk (BONK), Dogecoin (DOGE), Pepe (PEPE), Shiba Inu (SHIB), and Wen (WEN), among others, are created to make crypto more fun, given their relatively low real-life utility.
AI crypto assets are currently getting more attention, given the boom in AI technology. Both meme and AI-related coins manage to attract a lot of attention from speculators.
Most investors who invest in meme and AI coins do so because they are keen on cashing in and out of them at the right time. This allure of quick gains is what draws investors to these digital assets.
For instance, AI-themed cryptocurrencies have been growing in appeal, causing a new wave of excitement. Their growing appeal is associated with the boom in the AI market and the potential connection to popular companies like the ChatGPT AI agent developer OpenAI and NVIDIA.
Meanwhile, Sam Altman, the CEO of OpenAI, is also the co-founder of Worldcoin (WLD), a digital coin that merges AI, UBI, and blockchain technologies. NVIDIA, on the other hand, provides solutions for the AI industry.
Although meme coins and AI tokens are quite appealing, investors need to exercise caution when investing in them, just like they would with any traditional crypto token.
Conclusion
With factors such as positive market sentiment, Bitcoin ETFs, and the rise of meme and AI coins driving up the price of crypto tokens, it remains to be seen where the crypto markets will go over the coming weeks when the Bitcoin halving event and Ethereum’s Dencun upgrade take place.
According to data on CoinMarketCap, the current crypto market capitalization stands at $2.48 trillion. It’ll only be a matter of time before we can establish whether the current market circumstances are a result of a bull trap or a bull run.
Given the volatile nature of crypto assets, investors must remember to do their own research before investing. This guide is only for informational purposes and not an endorsement of any crypto project.