Bitcoin breaks through $40,000 as institutional investors lead a new bull run

Bitcoin, as a decentralized blockchain currency, was born after the financial crisis in 2009. Its creator, Satoshi Nakamoto, aimed to provide an alternative currency that is not under centralized control. After 12 years of development, Bitcoin has become a financial phenomenon that cannot be ignored, and has even gained recognition from some mainstream financial institutions.

Recently, the value of Bitcoin has attracted widespread attention again. On January 8, 2021, Bitcoin broke through the $40,000 mark, setting a historic new high of $41,940, doubling in value in just over a month. On January 15, Bitcoin once again touched the $40,000 threshold. This continuous performance of hitting new highs has greatly boosted confidence in the cryptocurrency market.

As of January 20, the price of Bitcoin fluctuated around $35,000. Such drastic price volatility is not uncommon in the cryptocurrency market, primarily due to the decentralization and anonymity characteristics of Bitcoin, which lead to a broader trading range. Data shows that the daily average volatility of Bitcoin is 3.75%. It is worth noting that on March 12, 2020, Bitcoin experienced a single-day drop of over 50%.

Compared to the bull market in 2017, a notable feature of the current market cycle is the massive participation of institutional investors. Data shows that in January 2021, there were multiple large Bitcoin transfers, including two transactions exceeding $300 million. Between January 11 and 15 alone, 65 large transfers were recorded, with 19 coming from anonymous wallet addresses, totaling 92,201 Bitcoins, worth approximately $3.5 billion.

Blockchain data shows that only 0.00695% of Bitcoin addresses hold 42.5% of the Bitcoin. This increase in concentration reflects that institutional investors are gradually becoming the main participants in the market, which may have a positive impact on the price stability of Bitcoin.

The core advantages of Bitcoin lie in its security and scarcity. In terms of security, the design of Bitcoin is committed to establishing a robust trust mechanism from its underlying logic to all its components. Theoretically, only by controlling more than 51% of the computational power can one break the Bitcoin network, which is nearly impossible to achieve in practice. Over the past 12 years, the Bitcoin network has withstood countless attacks, proving its security.

In terms of scarcity, the total supply of Bitcoin is capped at 21 million, with mining expected to cease by the year 2140. This artificially set scarcity makes Bitcoin a unique digital asset. Notably, due to reasons such as the loss of private keys, approximately 3.7 million Bitcoins (around 20% of the circulating supply) are currently considered permanently lost, further increasing the scarcity of Bitcoin.

The high volatility of the Bitcoin market partly stems from its decentralization and anonymity features, which make it a truly free market driven by economic factors, unaffected by trading restrictions or circuit breaker mechanisms like those in the stock market.

Currently, mainstream financial institutions have significant differences in their views on Bitcoin. Some are concerned that regulatory policies may affect the development of Bitcoin, while others believe that stablecoins may replace Bitcoin's position. However, the 12-year development history of Bitcoin has proven its value and durability. Although external factors may have short-term impacts on Bitcoin, these factors are more likely to highlight Bitcoin's unique value rather than determine its survival.