Bitcoin, the world's first and most popular cryptocurrency, has been on a remarkable journey over the past year. More and more people have wanted to buy Bitcoin in Norway and across the globe as its value has risen significantly. As of February 15, 2024, it has risen to over 52,000 USD, which corresponds to over 550,000 NOK. In other words, Bitcoin is approaching a new all-time high in Norwegian kroner (adjusted for exchange rates) - welcoming news for all cryptocurrency enthusiasts in Norway. Keep in mind that the Norwegian krone (NOK) is one of the G10 currencies of the world.
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A year ago, one Bitcoin was traded for around 24,000 USD, or approximately 250,000 NOK. The significant increase, which really began in the fall of 2023, can be attributed to several factors. Let's take a closer look at what has caused the significant price increase of Bitcoin.
One of the most fundamental aspects of Bitcoin is what is known as Bitcoin halving. Imagine a car manufacturer producing a particular car model. They produce and deliver a fixed number of this model per month. As the popularity of this car model begins to soar, the manufacturer refuses to increase production in line with the increasing demand. The price per car will then rise. As years go by, the car manufacturer even halves the number of new cars of the popular model. There will now be a huge scarcity of cars considering the high demand, and consequently, the price per car will increase even more. This is similar to what happens with Bitcoin during a 'halving' event. Every four years, the number of new bitcoins created and earned by miners is halved. The supply of new Bitcoin is reduced, and if demand remains strong, the price is pushed up. This is part of Bitcoin's built-in monetary policy.
In 2023 and into 2024, Bitcoin has experienced an increase in institutional adoption and interest. The CEO of BlackRock, the world's largest asset manager, previously gave Bitcoin the cold shoulder. Now, he believes the future will be shaped around Bitcoin and blockchain technology. Other major institutional investors and global technology companies have also genuinely begun to take an interest in Bitcoin, recognizing its potential as a digital asset. The increased demand and interest have further strengthened Bitcoin's price.
A spot Bitcoin ETF is an investment instrument that gives investors exposure to the price movements of Bitcoin through their regular brokerage accounts. Unlike Bitcoin futures ETFs, a spot Bitcoin ETF invests directly in Bitcoins as the underlying asset, not derivative contracts based on its price. This leads to a regulated and accessible way for financial institutions to invest in the digital currency. Previously, many of those now investing in Bitcoin spot ETFs have been hindered by investment mandates and/or regulatory requirements.
Approvals of several spot Bitcoin ETFs in the USA have thus opened the door to many new investors, further driving demand. A spot Bitcoin ETF offers several benefits for investors, including easier access, direct exposure to the price of Bitcoin, and thus the potential for price appreciation. The current development suggests that not enough Bitcoin is being "mined" to meet demand after the major providers of Bitcoin ETFs entered the picture.
Ultimately, what matters is that more and more prominent individuals and companies are expressing their interest and confidence in Bitcoin. More products and services are being built with Bitcoin, and adoption of the leading digital currency continues like a freight train. In week five, we speculated whether Bitcoin could continue its ascent in February, and the verdict (so far) is that we have indeed received an answer!
This text is intended to inform and is not an investment recommendation.
Best regards,
Adam Jakobsen.
NBX.
