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Bitcoin made history on December 4 by surpassing $100,000 for the first time before sliding below the milestone less than 24 hours later. The cryptocurrency’s volatility remains a central concern for investors, even as its growing role in financial markets becomes clearer.
The price of Bitcoin dramatically peaked at $103,844.05 late Wednesday but settled at around $99,140 by Thursday afternoon, according to Coin Metrics. Mike Novogratz, CEO of Galaxy Digital, called the milestone a “paradigm shift” for digital assets. “Bitcoin and the entire digital asset ecosystem are on the brink of entering the financial mainstream,” he said.
What fueled the rise?
President-elect Donald Trump’s pro-crypto stance partly buoyed Bitcoin’s surge. He nominated Paul Atkins as SEC chair, a move widely seen as favorable for the industry. Atkins, known for his crypto-friendly approach, is expected to replace Gary Gensler, a vocal critic of cryptocurrencies.
Investor sentiment also drove the rise in Bitcoin’s price. As Bitcoin climbed, it triggered a wave of short position liquidations, wiping out over $132 million in just a few hours. Its dominance in the crypto market increased to 57%, further solidifying its influence.
The Bitcoin Fear & Greed Index climbed to a high of 94 on November 22 before settling at an “extreme greed” level of 84 after the latest rally. Social sentiment reflected the euphoria in the market, and Google Trends reported a sharp increase in Bitcoin-related searches on Thursday.
Yet, experts caution against too much optimism. “It’s volatile, unpredictable, and is driven by speculation, none of which makes for a sleep-at-night investment,” said Dan Coatsworth, an investment analyst at AJ Bell.
The risk of corrections
Bitcoin’s rapid dip below $100,000 highlights the dangers of profit-taking and market corrections. This cycle of sharp rises and sudden declines has defined Bitcoin’s history. As Federal Reserve Chair Jerome Powell noted, Bitcoin functions more like digital gold than a traditional currency.
Despite its ups and downs, Bitcoin has gained over 133% this year and 42% since the election. These numbers attract both seasoned investors and newcomers, driven by the fear of missing out. Yet, analysts like Kathleen Breitman, co-founder of cryptocurrency Tezos, warn that markets driven by momentum require caution.
While some view Bitcoin as a store of value, others remain skeptical of its ability to stabilize. The potential for regulatory changes under the incoming administration could pave the way for further adoption, but it also adds uncertainty.
For now, Bitcoin’s crossing of the $100,000 threshold is a historic achievement, but its journey ahead will likely remain as volatile as ever. Investors are advised to tread carefully, keeping in mind both its immense potential and its significant risks.
