In recent months, Bitcoin's price has skyrocketed, briefly surpassing the staggering figure of $99,000 per coin, marking a new historical high. As of November 28, the cryptocurrency's value stabilized around $95,000, pushing its market capitalization to approximately $2 trillion, which places it as the eighth largest asset globally. This meteoric rise is striking, particularly given that just last January, Bitcoin's price plunged below the $40,000 mark. In less than a year, its value has more than doubled, prompting many to wonder what has driven this surge and what the future holds for Bitcoin.

According to Yu Jianing, co-chairman of the Blockchain Special Committee of the China Communications Industrial Association and honorary chairman of the Hong Kong Blockchain Association, the rise in Bitcoin prices is due to a confluence of factors. From a macroeconomic perspective, the persistent uncertainty in the global economy, coupled with shifts in monetary policy, has played a significant role in pushing Bitcoin's price higher. Changes in the Federal Reserve's monetary policies and a heightened expectation for liquidity easing have rekindled the interest of investors in risk assets, including Bitcoin.

Moreover, Bitcoin's inherent scarcity has further fueled its price increase. Yu Jianing emphasized the significance of Bitcoin's halving mechanism, which takes place approximately every four years, halving the block rewards that miners receive. In April this year, Bitcoin underwent its fourth halving, reducing the supply of new coins and reinforcing its characteristics as a scarce asset. Historical patterns suggest that Bitcoin tends to experience significant upswings in market price before and after these halving events.

In addition, the introduction of Bitcoin spot ETFs has lowered barriers for investment, allowing a broader range of investors to enter the market more readily. A senior researcher at OKX, a prominent digital asset trading platform, highlighted that this development has attracted significant capital influx, which has become a crucial support for Bitcoin’s price.

Currently, the U.S. Bitcoin spot ETF has emerged as a major channel for capital to flow into the cryptocurrency market. Recent data indicates that on November 19, net inflows into Bitcoin spot ETFs reached an impressive $810 million, bringing the total net inflow since their inception to $28.3 billion, with total assets nearing $89 billion. This lowered investment threshold has prompted international institutions to accumulate Bitcoin aggressively, with companies like MicroStrategy massively increasing their Bitcoin holdings recently.

As Bitcoin's price continues to soar, market sentiment has become increasingly bullish. Analysts predict that by the end of this year, Bitcoin prices could reach as high as $125,000 per coin, and they even speculate that by the end of 2025, it might hit the staggering mark of $200,000.

However, the question of whether Bitcoin's price can sustain its upward trajectory remains uncertain. Zhao Wei, an analyst, noted that while Bitcoin is currently experiencing a strong upward momentum, its future performance will largely depend on how quickly investors absorb favorable news, as well as changes in monetary and regulatory policies in major developed countries. In the short term, Bitcoin may encounter severe volatility, leading to uncertainty in its price movements.

Yu Jianing further elaborated that in the near term, Bitcoin is likely to navigate through a phase of fluctuations, searching for new support or resistance levels. From a more prolonged perspective, the direction of its price will heavily depend on various factors, including global liquidity, economic outlook, and the regulatory landscape.

As Bitcoin's popularity rises, the market for crypto assets continues to expand, potentially reshaping global capital flow patterns and asset allocation strategies. Xiao Sa, a senior partner at Beijing Dacheng Law Firm, pointed out that the traditional financial sector is increasingly bridging with the crypto world. Against a backdrop of sluggish global economic growth, cryptocurrencies like Bitcoin could become favored inflation hedging assets for international investors.

Despite this excitement, the rapid rise of Bitcoin has also spurred concerns over potential risks. Zhao Wei expressed that the current market is characterized by overheating, leading to rising leverage ratios. Some funds are choosing to take profits, which increases selling pressure and can trigger price pullbacks. Additionally, Bitcoin faces technical hurdles and the movement of substantial funds in the market may further amplify price volatility.

On the night of November 25 to early November 26, Bitcoin experienced extreme fluctuations, soaring to about $99,000 per coin before swiftly plummeting below $93,000, resulting in a drop of over 6% within just a few hours, which caused more than 170,000 traders to be liquidated, amounting to a total loss of $547 million. Other cryptocurrencies also faced various degrees of decline, with coins like Dogecoin and Cardano seeing drops exceeding 9%, highlighting the fragile and high-risk nature of the crypto market.

One significant risk that cannot be overlooked is market manipulation. Yu Jianing analyzed that the decentralized nature of capital in crypto assets makes the market susceptible to manipulation by large funds, leading to sharp "pump and dump" activities that can provoke irrational behavior among retail investors. The reliance on blockchain technology also introduces potential vulnerabilities, such as hacker breaches or smart contract flaws, which could result in substantial asset losses.

Compliance and regulatory issues pose yet another challenge. Yu Jianing stressed that globally, the uncertainty surrounding the regulation of crypto assets remains high. Adjustments in regulatory policies, such as stricter approvals for Bitcoin spot ETFs, could easily trigger drastic market fluctuations.

Historically, China's regulatory stance has been crystal clear in categorizing crypto-related business activities as illegal financial operations. Authorities have maintained strict oversight on crypto activities, implementing measures to curtail Bitcoin mining and severing funding pipelines associated with speculative trading in the cryptocurrency space. In August of this year, the Supreme People’s Court and the Supreme People’s Procuratorate jointly issued interpretations regarding the application of laws to certain money laundering cases, categorizing virtual asset transactions, including Bitcoin, as methods for money laundering, thus intensifying the crackdown on irregular trading activities in cryptocurrencies.

Overall, as the excitement surrounding Bitcoin and the broader crypto market intensifies, the emergence of new risks and uncertainties is undeniable. Investors are advised to adopt a rational and cautious approach in navigating the current market. Close attention to regulatory developments and market trends is essential to avoid falling into the trap of following the crowd blindly, Zhao Wei cautioned.