May 24, 2024

Bitcoin Climbs 40 Percent in January as Crypto Market Jumps by $280 Billion

3 min read

Bitcoin Climbs 40 Percent in January as Crypto Market Jumps by $280 Billion

The cryptocurrency market surged at the start of 2021 as Bitcoin surged 40% in January and the overall market cap gained $280 billion in value.

Why Bitcoin Gained Momentum

Several factors drove the rally, including:

  • Increased institutional adoption: Major financial institutions such as BlackRock, Fidelity and SkyBridge Capital had all indicated their intention to increase their involvement in the crypto market.
  • Revised regulations: The UK financial regulator recently revised its crypto regulations, granting crypto businesses access to banking services and helping to boost confidence in the industry.
  • The follow-through of a price rally late 2020: The end of 2020 saw a significant rise in the price of Bitcoin, which boosted confidence and created a positive sentiment in the market.

What’s Ahead?

It’s too early to make any definitive predictions, as the cryptocurrency market can be highly volatile. However, analysts are optimistic and believe that the market could continue to gain momentum in the coming months.

With institutional investors becoming more involved and more governments revising regulations, it’s likely that the crypto market will remain in favour. This could give Bitcoin and the wider crypto market a much-needed boost and further reduce the barriers for entry for new investors. As the new year began, the cryptocurrency market saw a bull run that has pushed the total market capitalization past the $1.10 trillion mark. Bitcoin (BTC) has been the main driver behind the upsurge in total value, climbing 40 percent in January and taking the flagship cryptocurrency’s market capitalization to over $820 billion.

The surge in Bitcoin’s price, which started with the start of the new year, saw the coin hit its previous all-time high of $41,941 on Jan. 8. It has since pulled back, trading around $32,823 on Feb. 1. Despite the pullback, BTC’s price is still 28.5 percent higher than it was at the start of the year.

This bullish run was seen across the entire crypto market, with the total market capitalization of all cryptos ballooning by $280 billion in the first month of 2021. Ethereum (ETH) trading near its all time-high of $1,454 and Cardano (ADA) rallying 14 percent this month.

The crypto market rally is being fueled by a surge of institutional investors and an increased demand from retail investors. We recently saw Tesla Inc. purchase $1.5 billion worth of BTC, while Fidelity Digital Asset Services announced that institutional investors are now a key component of its business following three years of operation. This institutional demand for crypto has also been evidenced by companies such as Ruffer Investment Company and Canadian asset manager CI Global Asset Management investing in BTC.

The rise in institutional involvement has seen big wallet providers such as Coinbase and Square benefit significantly from the increased demand for digital currencies. Square’s Cash App saw a whopping 185 percent growth in the number of active user accounts between the first and fourth quarter of 2020, while Coinbase recently became a publicly traded company.

The surge in institutional interest in digital currencies has also led to an increased demand from retail investors. This demand has been further spurred by the increasing accessibility to digital currency investments, with platforms like Grayscale offering digital asset investment services, as well as traditional financial institutions such as banks offering support and custody services.

It is clear that 2021 will be an interesting and novel year for digital currencies. As the adoption of cryptocurrencies continues to grow, so too will their underlying value, with the total market capitalization of all cryptos likely to break the $2 trillion mark soon.