4 Key Factors that can Kick Start the Next Leg Up for Bitcoin

We go over a few critical factors that could put Bitcoin on track to scaling new heights.

01:10 31 January 2022

The crypto market is in a bit of a bind. Bitcoin, in particular, has lost its trajectory completely. It's been on continuous decline for weeks now but has done well to weather the storm holding firm for the time being. As the bearish trend starts to show early signs of exhaustion, here we give you an interesting roundup of a few key factors that we think could send Bitcoin soaring on its next leg up.

 

A Spot Bitcoin ETF Coming Down the Pike

2021 saw several Bitcoin-linked ETFs products hit the market.

 

Proshares BTC futures ETF got its stamp of approval from Security Exchange Commission’s (SEC) last year and debuted on the NYSE with much fanfare, only to be followed by another ETF product weeks later. The ever-increasing expectations of the long-awaited spot Bitcoin ETF has dominated the markets for a few months now. And it appears it won't be long before the first pureplay Bitcoin ETF makes its way out. 

 

But some people are convinced the spot Bitcoin ETF won't see the light of the day at least in the short term.

 

They argue that SEC has set a precedent already and the recent rejections of a spot bitcoin ETF underlines their preference for ETF products linked to BTC futures. The SEC looks at these futures based ETFs as a really good vehicle for traders and investors to invest into Bitcoin, so unless the SEC sees a big problem with the future ETFs that can weigh heavily on its performance there is no need for them to rethink (about having a spot BTC ETF). SEC’s indecisiveness is proving to be a big stumbling block on the way through, but traders, investors and analysts are keeping their fingers crossed.

 

Bitcoin's rise to mainstream finance has made SEC's indecisiveness and unwillingness to change its stance look a little silly. The lack of regulatory supervision in the Bitcoin spot market is a huge concern for the SEC, and it is hard for a decentralized digital token like BTC to fall within a regulatory framework the SEC prefers.

 

SEC’s indecisiveness is proving to be a big stumbling block on the way through but traders, investors and analysts are keeping their fingers crossed. That being said, there is a significant pent up demand so when the spot BTC ETF rolls out it would overshadow the size of the BTC futures ETF which saw $550 million dollars on the very first day of it hitting the market.

 

More Countries Going the El Salvador Way

El Salvador has a staunch supporter of Bitcoin in its president Nayib Bukele. He was in the news early last week for going Bitcoin shopping in a crypto market that could barely stay afloat in the wave of selling. Leading the way for 'buy to dip' advocates, he picked up 410 bitcoins for $15 million and infused a fresh dose of enthusiasm into an otherwise insipid market. This comes a week after reports surfaced claiming that El Salvador's bitcoin buying spree might actually put its credit risk in a bit of a jeopardy. 

 

Several experts think crypto's watershed moment in terms of adoption came about last year when the pro-crypto leader made Bitcoin a legal tender and went on to announce the nation's launch of a 10-year $1 billion bitcoin bond. South American countries like Panama are likely to follow the lead and are already showing a great deal of interest to give Bitcoin their sovereign backing.

 

Increasing Supply Squeeze

Last year, Glassnode made an interesting observation about the phenomenon of supply squeeze in Bitcoin. Despite the market correcting heavily, 76% of Bitcoin tokens in circulation moved from liquid into illiquid wallets, the analytics provider estimated. For the uninitiated, illiquid coins are those sent to an address with little to no history of trading or spending and are tough to be accessed. This illiquid supply movement hammers home the point that Bitcoin investors are more inclined to accumulating tokens and to see their holdings grow in value over time.

 

The Lighting Network is Looking Primed and Ready to Give Bitcoin a Big Push

The average per-second transaction statistic of Bitcoin doesn't compare well to other tokens in the crypto world, laying bare a vulnerability that makes scaling hard. The underlying proof of work mechanism proves to be a drag on its ability to validate transactions faster, raising serious question marks around whether it can pivot into a modern digital payment solution with widespread adoption.

 

That is where the Lightning Network, or LN for short, comes into picture.

 

The LN protocol brings a robust second-layer scaling solution to Bitcoin allowing for users to conduct a number of near-instant small payments at a reasonable fee. This doesn't challenge one bit the libertarian values that Bitcoin promotes namely privacy and security.

 

Crypto experts believe that LN will play a crucial role in transforming Bitcoin into something bigger and faster to the point where it will become a much-preferred payment instrument.

 

We're certainly not alone in thinking that these factors will play a pivotal role in Bitcoin's ascent to new highs. If you're a Bitcoin enthusiast and want to be able to trade with an edge in this see-sawing market, you may have to look at sophisticated tools such as quantum ai to boost your chances of increasing your profits. Go to their website to figure out how their intelligent trading algorithm has been helping traders to string together profitable trades while keeping the level of risk low.