1. Introduction

By 2025, Bitcoin’s position as the leader in the cryptocurrency market remains solid. As of early May, the price of Bitcoin is around $95,000 to $100,000, once reaching the $100,000 mark before pulling back. This wave of increase began with the halving event in April 2024, but the market performance is far lower than in previous cycles: the price has only increased by about 46% within a year after the halving, hitting a historical low for the same period, with the price being only about 10% lower than the historical high. This situation reflects the dual impact of market maturity and macro environment—factors such as liquidity expectations and macro uncertainty are widely believed to have suppressed the expectation of a sharp rise. In such a market environment, investors are not only concerned about the price itself, but also various factors driving price changes: technical indicators, on-chain activity, supply and demand structure, as well as macroeconomic and geopolitical events.

LoginGate.ioTrading platform for BTC trading:https://www.gate.io/trade/BTC_USDT

2. Overview of Bitcoin

2.1 Development History of Bitcoin

The origin of Bitcoin can be traced back to 2008, when a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” was published by Satoshi Nakamoto, proposing the concept and theoretical framework of Bitcoin. Satoshi Nakamoto’s true identity remains a mystery to this day, adding a layer of mystery to Bitcoin. In the paper, Satoshi Nakamoto elaborated on how Bitcoin utilizes a peer-to-peer network and proof of work mechanism to achieve a decentralized electronic cash system, solving the trust and double spending issues present in traditional electronic payment systems.

On January 3, 2009, Satoshi Nakamoto mined the first block of Bitcoin, known as the “Genesis Block,” on a small server in Helsinki, Finland, and was rewarded with 50 bitcoins. This marked the official launch of the Bitcoin network. In the Genesis Block, Satoshi Nakamoto wrote the following message: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks,” not only indicating the timestamp of the block’s creation but also hinting at the background of Bitcoin’s birth - distrust in the traditional financial system and exploration of decentralized currency.

In the first few years after the birth of BTC, its development was relatively slow, mainly spreading among niche groups such as technology geeks and cypherpunks. On May 22, 2010, the famous ‘Bitcoin Pizza Day’ event occurred, where BTC enthusiast Laszlo Hanyecz purchased two pizzas worth $41 with 10,000 BTC. This marked the first real-world value exchange using BTC and signaled its gradual entry into the public eye.

With the increasing popularity of Bitcoin, on July 17, 2010, the world’s largest Bitcoin exchange, Mt.Gox, was established, providing a relatively convenient platform for Bitcoin transactions. Subsequently, Bitcoin transactions gradually became active, and prices began to fluctuate. In the first half of 2011, the price of Bitcoin began to rise rapidly, from a few cents initially to over $30, reaching a historical high of $230 in November, but soon experienced a significant pullback, with prices falling to around $2. This price fluctuation attracted more attention and made people realize the high risk and volatility of the Bitcoin market.

In November 2012, Bitcoin experienced its first halving event, reducing the block reward from 50 bitcoins to 25 bitcoins. The halving mechanism is one of the important designs of Bitcoin. Approximately every 4 years (or every 210,000 blocks), the block reward of Bitcoin will be halved, gradually reducing the supply of Bitcoin, similar to the scarcity of gold, thereby supporting the value of Bitcoin to a certain extent. Subsequently, the price of Bitcoin gradually stabilized and ushered in a new round of bull market in 2013.

In early 2013, the price of Bitcoin soared again, reaching a historical high of $1242 in December. This round of rise was mainly driven by multiple factors, including investors’ distrust of traditional currencies triggered by the Cyprus banking crisis, the increasing global popularity of Bitcoin, and the gradual openness of some countries and regions towards Bitcoin. However, the Bitcoin price bubble burst afterwards, and for most of 2014, the price of Bitcoin remained at a low level. The collapse of the Mt.Gox exchange exacerbated market panic, causing the Bitcoin price to drop below $300 at one point.

From 2015 to 2016, the Bitcoin market was in a bear market and downturn, with prices continuously falling. In July 2016, Bitcoin experienced its second halving event, reducing block rewards to 12.5 bitcoins. This halving did not immediately lead to a significant price increase, but laid the foundation for the subsequent bull market.

In 2017-2018, Bitcoin ushered in its third bull market, and the price rose rapidly again. In the first half of 2017, the price of Bitcoin started to rise from around $1,000 and reached a historical high of nearly $20,000 by the end of the year. The main driving factors of this bull market include the entry of institutional investors, the launch of Bitcoin futures, and the increasing enthusiasm for cryptocurrency investments globally. However, in early 2018, the Bitcoin price bubble burst again, leading to a significant price correction and entering a bear market.

In 2019-2020, the price of Bitcoin was relatively stable, but also accompanied by significant fluctuations. In March 2020, due to the outbreak of the COVID-19 pandemic, the global financial markets experienced significant turmoil, and the price of Bitcoin once dropped to below $4000. However, as central banks around the world adopted loose monetary policies, market liquidity increased, and the price of Bitcoin quickly rebounded. In May 2020, Bitcoin experienced its third halving event, reducing block rewards to 6.25 Bitcoins, further driving up the price of Bitcoin.

At the end of 2020 to the beginning of 2021, institutional investors entered the market on a large scale, driving the continuous rise of Bitcoin prices. In April 2021, the price of Bitcoin reached a historical peak of around $64,000. However, subsequently, tightened regulatory policies in China, coupled with strengthened global regulation of cryptocurrencies, led to a significant decline in Bitcoin prices.

In 2022-2023, the price of Bitcoin plummeted significantly due to factors such as the Fed’s interest rate hikes and the collapse of Terra Luna, dropping below $20,000. In 2023, the price of Bitcoin fluctuated between $20,000 and $30,000.

In early 2024, market sentiment gradually improved, and prices began to rise slowly. In the middle of 2024, the spot Bitcoin ETF was approved, which is considered an important milestone in the development of Bitcoin, marking further recognition of Bitcoin in the mainstream financial market, leading to a wave of price increases.

2.2 The technical principles of BTC

The core technology of Bitcoin is blockchain, which is a decentralized, distributed ledger technology. The core feature of blockchain is to link all transaction records in chronological order in the form of blocks, forming a chain, hence the name blockchain. Each block contains a set of transaction data, a timestamp, the hash value of the previous block, and a random number (Nonce). The hash value is a fixed-length string obtained by hashing all the data within the block. It has uniqueness and irreversibility, meaning that any change in the data within the block will result in a change in its hash value. The hash value of the previous block closely connects the current block with the previous one, forming an immutable chain of transaction records.

Decentralization is one of the important features of Bitcoin. In the traditional financial system, transactions need to be carried out through centralized intermediaries such as banks and payment institutions, which are responsible for verifying the authenticity of transactions, recording transaction information, and maintaining the consistency of the ledger. Whereas, in Bitcoin, there is no central issuer and intermediary, and all transactions are jointly maintained by network nodes. The Bitcoin network is made up of numerous nodes around the globe that are connected together via the internet and work together to participate in Bitcoin’s transaction validation and block generation process. Each node keeps a complete copy of the blockchain, and when a new transaction occurs, the node validates the transaction and packages the verified transaction into a block to try to add to the blockchain. This decentralized design makes Bitcoin more secure and resistant to attacks, as there is no single central node that can be attacked or controlled.

Mining is the process in the Bitcoin network of generating new blocks and issuing new bitcoins, and it is also a key mechanism for maintaining the security and stability of the Bitcoin network. Miners compete for the right to record new blocks by solving complex mathematical problems. When a miner successfully finds a hash value that meets the criteria, they can add the new block to the blockchain and receive a certain amount of bitcoins as a reward. This process requires a significant amount of computational power and electricity consumption because finding a hash value that meets the criteria is a random process. Miners need to continuously try different random numbers until they find one that makes the block hash value meet the specific conditions.

Bitcoin uses the Proof-of-Work (PoW) mechanism to select the miner of the next block. Under the PoW mechanism, miners need to prove their work by calculation in order to obtain the right to record transactions and rewards. Specifically, miners need to hash the block containing transaction data, the hash value of the previous block, timestamp, and a random number, continuously adjusting the random number until the calculated hash value meets certain difficulty requirements. The difficulty requirements are automatically adjusted by the Bitcoin network based on the current computational power to ensure the generation of a new block approximately every 10 minutes. When a miner successfully finds a hash value that meets the criteria, they broadcast this new block to the entire network. Other nodes, after verifying the legitimacy of the block, will add it to their own copy of the blockchain and start mining on the next block.

The issuance mechanism of Bitcoin is closely related to mining. The total amount of Bitcoin is limited to 21 million, gradually released through the mining process. Initially, the reward for each new block was 50 bitcoins, and every 210,000 blocks (approximately 4 years), the block reward would halve. For example, from 2009 to 2012, the reward for each new block was 50 bitcoins; from 2012 to 2016, the reward halved to 25 bitcoins; from 2016 to 2020, the reward further halved to 12.5 bitcoins; from 2020 to 2024, the reward is 6.25 bitcoins; in 2024, the fourth halving took place, and the block reward became 3.125 bitcoins. Over time, the amount of newly issued bitcoins will decrease, eventually reaching the total limit of 21 million around 2140.

The transaction process of Bitcoin is based on the principles of cryptography, using public and private keys to ensure the security and privacy of transactions. Each Bitcoin user has a pair of public and private keys. The public key is used to generate a Bitcoin address, similar to a bank account number, through which others can send Bitcoin to the user. The private key is the user’s identity credential, used to sign transactions and prove ownership of the Bitcoin at that address. When a user initiates a transaction, they use their private key to sign the transaction information, then broadcast the signed transaction to the Bitcoin network. Upon receiving the transaction, other nodes use the sender’s public key to verify the authenticity of the signature. If the signature is verified and the amount of Bitcoin in the transaction does not exceed the balance at the sender’s address, the transaction is considered valid and is included in a new block. This cryptographic-based transaction verification mechanism ensures that only the holder of the private key can utilize the Bitcoin at the corresponding address, thereby ensuring the security of funds.

Three, historical analysis of Bitcoin price fluctuations

3.1 Review of the historical trend of Bitcoin prices

Since its birth in 2009, Bitcoin’s price has shown dramatic fluctuations, resembling a legendary financial epic, attracting the attention of global investors. In the early days of its birth, Bitcoin was almost ignored and of little value. On May 22, 2010, a landmark event in Bitcoin’s history occurred when programmer Laszlo Hanyecz used 10,000 Bitcoins to purchase two pizzas, marking the first real-world exchange of value for Bitcoin. At that time, the price of Bitcoin was only 0.003 cents, virtually ‘worthless’.

In 2011, Bitcoin began to gain prominence, breaking through the $1 mark for the first time. It then embarked on a remarkable upward journey, soaring to as high as $30, a 3000-fold increase. This surge delighted early Bitcoin investors, as if they had stumbled upon a ‘gold mine’ overnight. However, the good times did not last long. The price of Bitcoin quickly plummeted to around $2, exposing people to the high volatility and uncertainty of the Bitcoin market for the first time.

In 2013, the price of Bitcoin saw a more rapid growth, climbing from tens of dollars at the beginning of the year to a peak of $1242, an increase of over 20 times. During this period, Bitcoin rapidly rose in the Chinese market, attracting a lot of investors’ attention. At the same time, the crisis in Cyprus banks triggered a crisis of trust in traditional currencies among investors, prompting them to turn to digital currencies like Bitcoin, further driving up the price of Bitcoin. However, the crazy rise in Bitcoin prices also drew the attention of regulatory authorities, leading to strengthened regulations on digital currencies in countries like China, causing a sharp drop in Bitcoin prices in a short period of time, falling to around $450 at the lowest point.

In 2014-2015, the Bitcoin market entered a relatively low period, with prices fluctuating between $200 and $400, jokingly referred to as the “death cross period.” During these two years, the value of Bitcoin seemed to be in a lull, and investors’ enthusiasm waned. However, Bitcoin did not collapse, but quietly accumulated strength, waiting for the next outbreak.

In 2016-2017, the price of BTC once again saw a major surge. In 2016, BTC began to emerge from a long period of stagnation, and the price gradually started to rise. By 2017, the price of BTC skyrocketed, rising from around $1,000 at the beginning of the year to nearly $20,000 by the end of the year, an increase of over 20 times, setting a new historical high. The main driving factors of this bull market include the continuous expansion of BTC application scenarios, the increasing awareness and acceptance of BTC by investors, and the entry of a large number of institutional investors. However, as the price of BTC continued to climb, market bubbles gradually appeared, regulatory authorities once again strengthened their supervision of the cryptocurrency market, and the price of BTC began to sharply correct at the end of the year.

From 2018 to 2020, the price of Bitcoin experienced significant ups and downs. In 2018, the price of Bitcoin started a steep decline from its all-time high of $20,000, dropping to below $3,000, a decrease of over 85%. During this period, the decline in the price of Bitcoin was mainly affected by tightening regulatory policies, spreading market panic, and the failure of some digital currency projects. In 2019, the price of Bitcoin gradually rebounded, but in March 2020, due to the outbreak of the COVID-19 pandemic, the global financial markets experienced significant turmoil, and the price of Bitcoin also suffered, dropping to below $4,000 at one point. However, as central banks around the world adopted loose monetary policies, increasing market liquidity, the price of Bitcoin quickly rebounded and once again surpassed $20,000 by the end of the year.

In 2021, Bitcoin saw a record-breaking bull market. The price rose from around $30,000 at the beginning of the year, broke through $60,000 in April, and hit a historical high of $69,000 in November. The main driving factors of this bull market include the continuous entry of institutional investors, the launch of Bitcoin futures, and the increasing enthusiasm for cryptocurrency investment worldwide. However, the Bitcoin price experienced a significant pullback afterwards, mainly due to the tightening of regulatory policies in China, strengthened cryptocurrency regulation globally, and concerns about overvaluation in the market.

In 2022-2023, the price of Bitcoin plummeted significantly due to factors such as the Federal Reserve’s interest rate hikes and the collapse of Terra Luna, falling below $20,000. In 2022, after surpassing $42,000 at the beginning of the year, the price of Bitcoin started to decline steadily, plummeting to below $28,000 in May, slowly rebounding in July, but falling below $20,000 again in September. In 2023, the price of Bitcoin fluctuated between $18,000 and $30,000, with the market overall in a phase of oscillatory adjustment.

At the beginning of 2024, market sentiment gradually improved, and the price of Bitcoin started to rise slowly. In the middle of 2024, the spot Bitcoin ETF was approved, which is considered an important milestone in the development of Bitcoin, indicating further recognition of Bitcoin in the mainstream financial markets, and the price ushered in a wave of increases. By December 2024, the price of Bitcoin had surpassed $100,000, entering a sustained upward cycle.

3.2 Insights from Historical Price Fluctuations for Future Predictions

1. Trend judgment aspect

The historical trend of Bitcoin prices shows obvious cyclical characteristics, experiencing multiple transitions between bull and bear markets. Through analyzing historical trends, it can be observed that Bitcoin prices generally trend upward in the long term, but are accompanied by intense fluctuations. For example, during the periods of 2011-2013, 2016-2017, and 2020-2021, Bitcoin prices all experienced significant bull markets followed by bear market adjustments. This cyclical fluctuation pattern indicates that when predicting the future price trend of Bitcoin, it is necessary to pay attention to changes in market cycles, combine macroeconomic conditions, market sentiment, and other factors to assess the current market stage, and make reasonable predictions about future price trends. Additionally, historical data also shows that the rise in Bitcoin prices is often accompanied by increased market attention, expanded use cases, and enhanced investor confidence. Therefore, when predicting future prices, it is important to closely monitor changes in these factors to better grasp price trends.

2. Risk assessment aspect

The high price volatility of Bitcoin makes investing in Bitcoin face significant risks. Major price fluctuations in history, such as the Mt.Gox incident and adjustments in Chinese regulatory policies, have resulted in huge losses for investors. These events indicate that the Bitcoin market is influenced by various factors, including technical security, regulatory policies, market sentiment, etc. Any change in these factors could trigger significant price fluctuations. Therefore, when investing in Bitcoin, investors need to fully understand the market risks, conduct risk assessment and management. On one hand, it is important to focus on the technical development and security status of the Bitcoin market to prevent technical risks like hacker attacks; on the other hand, closely monitor changes in regulatory policies of various countries, adjust investment strategies promptly, and mitigate policy risks. In addition, investors need to remain calm and rational, avoid blindly following the market sentiment during market exuberance, not be swayed by emotions during price fluctuations, and make sound investment decisions. At the same time, building a diversified investment portfolio is an effective way to reduce risks. All funds should not be concentrated solely on Bitcoin investments, but should be diversified across different asset categories to mitigate the impact of price fluctuations of a single asset on the investment portfolio.

4. Analysis of Factors Affecting Bitcoin Price

4.1 Market Supply and Demand Relationship

4.1.1 Issuance Mechanism and Supply Characteristics of Bitcoin

The issuance mechanism of Bitcoin is based on decentralized blockchain technology, generated through the process of ‘mining.’ The total amount of Bitcoin is strictly limited to 21 million, and this fixed total upper limit is a core feature of Bitcoin’s supply, giving Bitcoin a scarcity similar to gold, theoretically enabling it to resist inflation.

The issuance speed of Bitcoin is not uniform, but follows a decreasing pattern. Every 210,000 blocks, the mining reward of Bitcoin will be halved. Initially, the mining reward for each block was 50 bitcoins. By 2024, it has undergone four halvings, and the current mining reward for each block is 3.125 bitcoins. As time passes, the number of newly generated bitcoins will become less and less. It is expected that around 2140, all bitcoins will be fully issued. This decreasing issuance mechanism gradually stabilizes the supply of bitcoins, reducing the new supply in the market, thereby potentially providing support for the price.

In addition, the supply of BTC is also influenced by the behavior of miners. Miners need to consume a large amount of computing resources and electricity costs during the mining process. When the price of BTC is high, the profit margin of mining increases, attracting more miners to participate in mining, thereby increasing the supply of BTC; conversely, when the price of BTC is low, the mining cost is relatively high, and some miners may choose to pause or exit mining, leading to a decrease in the supply of BTC.

4.1.2 Drivers of Market Demand

1. Investor demand: As a new type of investment asset, Bitcoin has attracted a lot of attention from investors. Its high price volatility and potential high returns make Bitcoin an important component of investors’ asset allocation. In times of global economic instability, rising inflation expectations, or escalating geopolitical tensions, Bitcoin is often seen as a safe-haven asset. Investors increase their demand for Bitcoin to seek asset preservation and appreciation. For example, at the beginning of the COVID-19 outbreak in 2020, the global financial markets were turbulent. Although the price of Bitcoin briefly fell, it quickly rebounded and reached new highs as central banks around the world implemented loose monetary policies and increased market liquidity. This reflects investors’ demand for Bitcoin as a safe-haven asset in times of economic uncertainty.
2. Enterprise Acceptance: More and more enterprises are starting to accept Bitcoin as a payment method, which further drives the market demand for Bitcoin. Some well-known enterprises, such as Tesla, Square, etc., have already started accepting Bitcoin payments. This not only increases the visibility and acceptance of Bitcoin but also creates more application scenarios for Bitcoin. Accepting Bitcoin payments can attract more consumers who hold Bitcoin, expanding the customer base. Additionally, it can reduce the cost and time of cross-border payments, improving transaction efficiency. With the continuous increase in enterprise acceptance, the utility and value of Bitcoin will be further enhanced, attracting more investors and users, and increasing market demand.
3. Payment demand: The decentralization and anonymity features of BTC give it unique advantages in cross-border payments and certain specific scenarios. Traditional cross-border payments usually require banks or third-party payment institutions, which are cumbersome, costly, and slow to arrive. BTC payments, on the other hand, enable direct peer-to-peer transactions without the need for intermediaries, offering fast transaction speeds, low fees, and no geographical or time restrictions. In regions with inadequate financial infrastructure, BTC payments provide a more convenient payment method for people. Furthermore, the anonymity of BTC also meets some users’ needs for privacy protection, making BTC popular in certain specific payment scenarios. The existence of these payment demands has driven the growth of the BTC market demand.

4.2 Macroeconomic Factors

4.2.1 The correlation between the global economic situation and the price of Bitcoin

The changes in the global economic situation have a significant impact on the price of BTC. During periods of strong economic growth and ample market confidence, investors usually prefer to invest in risky assets to pursue higher returns. As an asset with high risk and high return characteristics, BTC is often favored by investors, leading to increased demand and thus driving up the price. For example, in 2016-2017, as the global economy showed signs of recovery and the stock market performed well, the price of BTC also rose sharply, from around $400 at the beginning of 2016 to nearly $20,000 at the end of 2017, an increase of over 49 times.

However, when the global economy falls into recession or faces significant uncertainty, investors’ risk appetite decreases, preferring to hold safe-haven assets such as gold, the US dollar, etc. Although Bitcoin is considered to some extent as a safe-haven asset, due to its relatively small market size and high price volatility, investors may prioritize selling Bitcoin in times of economic crisis to obtain liquidity or transfer funds to safer assets. For example, during the global financial crisis in 2008 and the initial outbreak of the COVID-19 pandemic in 2020, the price of Bitcoin experienced significant declines. During the 2008 financial crisis, the price of Bitcoin dropped from around $100 to around $30; during the initial outbreak of the COVID-19 pandemic in 2020, the price of Bitcoin plummeted from around $8,000 to below $4,000 in just a few days, a drop of over 50%. This indicates that in times of economic recession or increased uncertainty, the price of Bitcoin may be negatively affected.

Furthermore, changes in the global economic situation will also affect investors’ expectations and confidence in Bitcoin. If the economic situation improves, investors will be more optimistic about the future development prospects of Bitcoin and willing to pay a higher price for it; conversely, if the economic situation deteriorates, investors’ confidence in Bitcoin may be shaken, leading to a price drop.

4.2.2 The Relationship between Interest Rates, Inflation Rates, and Bitcoin Prices

The impact of interest rates on Bitcoin prices: Interest rates are one of the important tools for macroeconomic regulation, with a wide-ranging impact on financial markets and asset prices. When interest rates rise, the yield of fixed-income assets such as bonds will increase, attracting investors to shift funds from risky assets to the bond market for more stable returns. As a risky asset, the attractiveness of Bitcoin will relatively decrease, investors may reduce their investments in Bitcoin, leading to a decrease in demand and a drop in prices. For example, in 2022-2023, the Federal Reserve raised interest rates multiple times to combat inflation, causing a significant increase in interest rates. This led to an increase in bond market yields, attracting a large influx of funds, while the Bitcoin market faced the pressure of capital outflows, resulting in a significant price decline. The price of Bitcoin fell from nearly $70,000 at the end of 2021 to around $16,000 at the end of 2022, a drop of over 77%.

Conversely, when interest rates fall, the yields of fixed-income assets such as bonds decrease, investors will seek higher-yield investment opportunities, the attractiveness of risky assets such as Bitcoin will increase, demand will rise, and prices may rise. For example, after the outbreak of the COVID-19 pandemic in 2020, central banks around the world took interest rate cuts, leading to a sharp decline in interest rates. This increased market liquidity, and investors began looking for new investment channels. The price of Bitcoin quickly rebounded and hit new highs during this period.

2. The impact of inflation rate on the price of Bitcoin: Inflation refers to the continuous rise in the price level, leading to a decrease in the purchasing power of money. In an inflationary environment, the value of traditional currencies will be eroded, and investors will seek assets for value preservation and appreciation. With a limited total supply, Bitcoin possesses a certain degree of resistance to inflation, making it a tool for some investors to cope with inflation. When the inflation rate rises, the demand for Bitcoin from investors may increase, driving up its price. For example, in some countries with severe inflation, such as Venezuela and Zimbabwe, there has been a significant increase in demand for and price of Bitcoin. Residents of these countries have been purchasing Bitcoin in order to protect their wealth from the devaluation of their national currencies.

However, the impact of inflation on the price of Bitcoin is not absolute. If the inflation rate rises while economic growth slows down or enters a recession, investors may pay more attention to the security and liquidity of assets rather than the anti-inflation properties, and the price of Bitcoin may be negatively affected. In addition, the market’s awareness and acceptance of Bitcoin will also affect the transmission mechanism of inflation rate to Bitcoin price. If the market’s acceptance of Bitcoin is low, even if the inflation rate rises, the price of Bitcoin may not show a significant increase.

4.2.3 Transmission Effect of Legal Currency Policy on Bitcoin Price

Taking quantitative easing policy as an example, the monetary policy has a clear transmission effect on Bitcoin prices. Quantitative easing policy refers to the central bank increasing the money supply by purchasing government bonds and other securities, lowering interest rates to stimulate economic growth. Under quantitative easing policy, market liquidity significantly increases, the money supply expands, leading to a decrease in the marginal utility of money. Investors, in search of assets for value preservation and appreciation, will turn to Bitcoin and other digital currencies.

Quantitative easing policies have led to ample liquidity in the market, investors’ risk appetite has increased, and they are more willing to invest in high-risk, high-return assets. Bitcoin, as an emerging investment asset, offers a high potential return, attracting the attention of many investors. Investors have been pouring funds into the Bitcoin market, driving up the price of Bitcoin. For example, after the global financial crisis in 2008, countries like the United States implemented quantitative easing policies, increasing market liquidity, and Bitcoin’s price saw a significant rise in the following years. From the end of 2012 to the end of 2013, the price of Bitcoin surged from around $13 to approximately $1242, an increase of over 94 times.

Quantitative easing policies can also lead to an increase in inflation expectations. In order to hedge against the risk of inflation, investors will increase their demand for inflation-resistant assets such as Bitcoin. With a fixed total supply, Bitcoin is not affected by currency issuance, making it considered to have a certain degree of inflation resistance. When investors anticipate an increase in inflation rates, they will purchase Bitcoin to preserve value, thereby driving up the price of Bitcoin.

In addition, quantitative easing policies affect the value of fiat currencies, leading to a decrease in investors’ confidence in fiat currencies. Bitcoin, as a decentralized digital currency not controlled by governments or central banks, is seen by some investors as an alternative or complement to the fiat currency system. When the credibility of fiat currency is questioned, the attractiveness of Bitcoin increases, and its price is also supported.

However, the impact of monetary policies on the price of Bitcoin is not unidirectional, and there is also a certain degree of uncertainty. On the one hand, quantitative easing policies may trigger market expectations of economic recovery, leading to changes in investors’ preferences for risk assets, thereby affecting the price of Bitcoin; on the other hand, changes in regulatory policies may also interfere with the transmission of quantitative easing policies to the price of Bitcoin. For example, some countries may strengthen regulations on the cryptocurrency market, restricting the trading and investment of Bitcoin, which would weaken the driving force of quantitative easing policies on the price of Bitcoin.

4.3 Regulatory Policy Factors

4.3.1 Regulatory Attitudes and Policy Measures Towards Bitcoin in Various Countries

As a new type of digital currency, Bitcoin’s decentralization and anonymity pose challenges to traditional financial regulation, and there are significant differences in the regulatory attitudes and policy measures towards Bitcoin in various countries.

1. Actively supporting coexistence with regulation: Some countries and regions have a relatively open and positive attitude towards Bitcoin, recognizing its legitimacy while strengthening regulation to promote the healthy development of the Bitcoin market. For example, in 2017, Japan revised the Payment Services Act to officially recognize Bitcoin as a legal payment method, while also requiring Bitcoin trading platforms to adhere to strict anti-money laundering and KYC (know your customer) regulations to prevent financial risks. The regulatory stance on Bitcoin in the United States is rather complex, with differing policies between the federal government and state governments. Overall, the U.S. regards Bitcoin as a virtual commodity or asset and regulates its trading and investment activities. The Securities and Exchange Commission (SEC) regulates securities issuance and trading involving Bitcoin, while the Commodity Futures Trading Commission (CFTC) oversees the trading of Bitcoin futures and other derivative products. Furthermore, the U.S. also requires Bitcoin trading platforms to comply with anti-money laundering, counter-terrorism financing, and other relevant laws and regulations.
2. Restrictions on trading and investment: Some countries have imposed certain restrictions on the trading and investment of Bitcoin to prevent financial risks and protect investor interests. For example, in September 2017, China issued the “Announcement on Preventing the Risks of Token Issuance Financing,” clearly stating that token issuance financing (ICO) is an unauthorized illegal public financing activity, and requiring a comprehensive ban on ICO activities and the closure of all domestic Bitcoin trading platforms. Subsequently, China has continued to strengthen the regulation of virtual currency-related business activities, strictly prohibiting financial institutions and payment institutions from participating in Bitcoin trading. South Korea has also adopted stricter regulatory measures for Bitcoin trading, requiring real-name registration for Bitcoin trading platforms, strict identity verification for trading accounts, and restricting minors from participating in Bitcoin trading. In addition, South Korea has strengthened tax supervision of the digital currency market, imposing capital gains tax on income from digital currency trading.
3. Comprehensive Ban: A few countries have taken a comprehensive ban on Bitcoin, believing that Bitcoin poses significant financial risks and potential illegal uses. For example, the Reserve Bank of India (RBI) issued a notice in 2018 prohibiting banks and financial institutions from providing services for transactions involving virtual currencies such as Bitcoin, causing a severe impact on India’s Bitcoin trading market. However, in March 2020, the Supreme Court of India overturned this ban, making Bitcoin trading legal again in India, but still subject to strict regulation. In addition, some countries such as Bolivia, Ecuador, etc., have also explicitly banned the use and trading of Bitcoin, believing that Bitcoin may pose a threat to their financial stability and currency policy implementation.

4.3.2 The direct and indirect impact of regulatory policy changes on the price of Bitcoin

1. Direct Impact: Changes in regulatory policies will directly affect the supply and demand relationship in the Bitcoin market, leading to short-term drastic fluctuations in Bitcoin prices. When regulatory policies become stricter, such as banning Bitcoin trading or restricting exchange operations, it will increase the supply of Bitcoin in the market while demand significantly decreases, often resulting in a rapid price decline. For example, in 2017, China completely banned ICOs and Bitcoin exchange platform operations. After this policy was implemented, the price of Bitcoin plummeted rapidly from around $5,000 to below $3,000 in a short period. Similarly, in 2018, the Reserve Bank of India prohibited banks from dealing with virtual currency-related businesses, leading to a significant decrease in trading activity in the Indian Bitcoin market and a noticeable price decline in Bitcoin as well.

Conversely, when regulatory policies tend to be loose or when the legal status of Bitcoin is clarified, it will enhance the confidence of market participants, attract more investors into the market, increase the demand for Bitcoin, and drive up prices. For example, after Japan recognized Bitcoin as a legal payment method, the trading activity of Bitcoin in Japan significantly increased, and the price also received some support.

2. Indirect impact: Changes in regulatory policies can also have an indirect long-term impact on the price of Bitcoin by influencing market participants’ expectations and behaviors. Strict regulatory policies may encourage a more standardized and mature Bitcoin market, reducing market manipulation and fraudulent activities, and enhancing market transparency and stability. This helps to boost investors’ confidence in Bitcoin, attracting more long-term investors into the market, thereby positively supporting the price of Bitcoin. For example, the gradual regulation and supervision of the Bitcoin market in the United States has increased Bitcoin’s acceptance among institutional investors, leading to more institutional investors allocating to Bitcoin, driving the long-term price increase of Bitcoin.

However, if there is a high level of uncertainty in regulatory policies, market participants may worry about the future investment environment, which could lead to a reduction in investment in Bitcoin, resulting in decreased market liquidity and intensified price fluctuations. Additionally, changes in regulatory policies will also affect the application scenarios and development prospects of Bitcoin. If regulatory policies restrict the use of Bitcoin in certain areas such as payments, cross-border transfers, etc., it will reduce the practicality and value of Bitcoin, having a negative impact on Bitcoin prices.

4.3.3 Regulatory Policy Uncertainty and Bitcoin Price Risk Assessment

The uncertainty of regulatory policies is one of the important risks facing the price of Bitcoin. Due to the global nature and innovation of the Bitcoin market, there are differences in the formulation and adjustment of regulatory policies in various countries, and the changes in regulatory policies are often difficult to predict, which brings significant uncertainty to the Bitcoin market.

In the case of high regulatory policy uncertainty, the price of Bitcoin faces significant downside risks. On the one hand, investors may reduce their investment in Bitcoin due to concerns about sudden tightening of regulatory policies, leading to a decrease in market demand and a decline in prices. For example, when there is news that a certain country may strengthen its regulation of Bitcoin, the price of Bitcoin often fluctuates, and investors adopt a cautious attitude, observing the market dynamics. On the other hand, regulatory policy uncertainty can increase the operational risks of Bitcoin trading platforms and related companies, potentially causing some platforms or companies to face compliance issues or even be forced to close. This will further affect market liquidity and investor confidence, exacerbating the decline in Bitcoin prices.

Regulatory uncertainty will also affect the long-term development of the Bitcoin market. If regulatory policies are not clarified in a timely manner, the Bitcoin market will find it difficult to form stable development expectations, and innovation and application promotion will also be hindered. This will limit the scale expansion and value appreciation of the Bitcoin market, exerting a negative impact on the long-term trend of Bitcoin prices.

To mitigate the risks brought by regulatory policy uncertainties, investors should closely monitor the dynamics of regulatory policies in various countries and adjust investment strategies promptly. On one hand, investors can diversify their investments to reduce reliance on Bitcoin as a single asset, thus minimizing the impact of regulatory policy changes on their investment portfolios. On the other hand, investors should choose compliant trading platforms and investment channels to ensure their investment security. At the same time, the Bitcoin industry should actively communicate with regulatory agencies to promote the improvement and clarity of regulatory policies, creating a favorable environment for the healthy development of the Bitcoin market.

4.4 Technological Development Factors

4.4.1 The impact of the advancement of blockchain technology on Bitcoin

As the underlying technology of Bitcoin, the advancement of blockchain technology has a profound impact on the value and market performance of Bitcoin. The core advantages of blockchain technology lie in its decentralization, distributed ledger, immutability, and encryption security, which provide solid technical support for Bitcoin.

The performance improvement of blockchain technology directly affects the transaction efficiency and scalability of Bitcoin. The early Bitcoin blockchain had issues of slow transaction processing speed and high fees, which limited its widespread use in large-scale commercial applications. With the continuous development of technology, second-layer scaling solutions such as Lightning Network have emerged, which establish payment channels off-chain to achieve fast and low-cost Bitcoin transactions. The application of Lightning Network has significantly improved the transaction speed of Bitcoin, allowing it to

4.5 On-Chain Data Analysis

Observing the on-chain data of Bitcoin can help understand the internal demand and supply situation of the network. The number of active addresses is a commonly used on-chain indicator, referring to the number of unique addresses that participate in transactions as senders or receivers within a day. An increase in the number of active addresses signifies more users participating in the Bitcoin network, usually seen as a signal of increasing demand or adoption rate. For example, historically, during bull markets, there is often a rapid growth in the number of active addresses, while during sharp price drops, the number of active addresses may temporarily decline. Therefore, a continuous upward trend in active addresses often supports price increases, and if the activity deviates from the price, it may indicate a change in investment sentiment.

Trading volume is also an important indicator, reflecting the scale of economic activity on the Bitcoin network. On-chain transaction volume refers to the total amount (or number) of on-chain transactions within a certain period of time; usually, an increase in large transaction volume indicates active behaviors such as capital inflows or profit-taking. Generally speaking, a rise in price accompanied by high trading volume is more convincing; if the trading volume continues to decline during price fluctuations, there may be a lack of support. Basic indicators such as active addresses and trading volume can help determine bullish or bearish sentiment: high activity and high trading volume often correspond to bullish signs, while the market may become sluggish when both decline.

The distribution of holding addresses and the structure of holders are also important on-chain data for judging the market. By analyzing the proportion of bitcoins held by different addresses, we can understand whether the market is dominated by large holders (‘whales’) or supported by retail investors. When the proportion of high-net-worth addresses is relatively large and on the rise, it indicates that large holders are accumulating, and the supply of bitcoins is concentrated in the hands of a few people; this may mean that the emotions of a few large holders are more sensitive to price, increasing the possibility of intensified fluctuations. Conversely, if the proportion of small holding addresses is relatively high, it may indicate more retail participation, making the market more dispersed. Recent data shows an increase in the number of addresses holding more than 1 BTC in the Bitcoin network, indicating that some funds are flowing to medium to high holders. This is often interpreted as a signal that large funds are bullish and buying on dips.

Advanced on-chain metrics such as MVRV ratio and Realized Cap can measure the degree of price deviation from the cost basis. The MVRV ratio (market value to realized value ratio) = current market value / realized value. Realized value (Realized Cap) aggregates each bitcoin based on the price at the last movement (such as transfer or transaction). MVRV can be seen as the average profit multiple of all bitcoins on the network: when MVRV is significantly above 1, it means that the market price is much higher than the average holding cost, most holders are in a profitable state, and it is easy to trigger profit-taking pressure; when MVRV is close to or below 1, it indicates that most investors are at breakeven or in a loss, the market is undervalued, and potential support increases. Therefore, extremely high MVRV values often appear near the top, signaling risk; while extremely low values may indicate a bottom. For example, if MVRV reaches 2.0 (i.e., average book profit of 100%), it has historically been an important resistance signal.

Realized Cap reflects the ‘realized total cost’, which is particularly significant when the market enters a stable growth stage. It removes the impact of long-term unused bitcoins, focusing the indicator more on the value of assets in real circulation. When a large amount of bitcoins enter circulation at a high price, Realized Cap will rise accordingly; if the market price falls, the turnover of tokens approaching the cost price will also affect this indicator. Contrasting Realized Cap with market value can estimate whether the current market is overheated and judge the flow of funds. Overall, on-chain indicators provide underlying data for analyzing investor behavior and market sentiment: activity and trading volume indicate usage heat; coin distribution and MVRV reveal value deviations and speculative sentiment. Investors can combine these data to judge potential turning points in the market - for example, in the bottom phase of a bear market, it often accompanies an extremely undervalued on-chain state (low MVRV) and a large number of idle chips about to become active.

V. Market Status and Forecast Trends for 2025

Taking a comprehensive view of the Bitcoin market, it is still in the upward phase of the historical bull market cycle at the beginning of 2025, but the pattern is different from the previous violent fluctuations of the bull market. Compared to the several-fold increase in the months following the halving in 2016 and 2020, the current cycle’s increase is slowing down. The current price mostly fluctuates in the range of $50,000 to $100,000. The participation of institutional investors has made the market structure more stable: spot ETFs and large institutional investors have a greater impact on the market. They tend to buy on dips and take profits on rebounds, thereby smoothing price fluctuations to a certain extent. Data shows that in early May 2025, Bitcoin ETFs attracted a net capital inflow of approximately $425.5 million in just one week. This indicates that despite retail fluctuations, institutional funds are still increasing their positions on dips, maintaining an optimistic outlook for the market.

The on-chain indicators of the current Bitcoin network also confirm a gradually stable trend. The number of active addresses continues to rise, indicating an improvement in user usage habits; at the same time, the concentration of holdings has increased, reflecting the entry of large funds - for example, the number of wallets holding more than 1 Bitcoin saw a 10% increase in early May. This means that some large holders may be waiting for clearer upward signals. On the other hand, the MVRV value has not reached an extremely high level, the current network’s average profit and loss is not drastic, which is relatively moderate compared to historical peaks. Overall, market sentiment is somewhere between caution and optimism: despite frequent short-term fluctuations in news (such as the pullback triggered by concerns about the Fed’s policy in January), long-term investors still have confidence in the future growth potential.

From a cyclical perspective, the April 2024 halving marks the beginning of a new round of inflation reduction, which should theoretically provide a tighter supply effect over the next two years. At present, the price of bitcoin has not yet broken through the higher mark of $110,000, and the market outlook remains to be seen. Some analysts believe that after standing at $100,000, bitcoin is expected to resume its sustained rally; A more optimistic view predicts that prices could hit the $120,000-$200,000 range by the end of 2025. In any case, professionals generally emphasize that the market has become more mature and the probability of an “explosive” rise has decreased, but a steady, sustainable upward path may be more in line with the current environment. This means that there may be volatility or consolidation in the short term (e.g., sideways before $100,000), while the long-term is still bullish. In this process, investors need to be wary of emotionally driven volatility, control leverage and position risk, and pay attention to the potential impact of global macro and regulatory developments on the market.

The chart above is for BTC price prediction purposes only and does not constitute investment advice. Cryptocurrencies are highly volatile, so please invest with caution!

Conclusion

Bitcoin price prediction is both an art and a science, requiring a variety of analysis methods to complement each other. However, no matter how diverse the analytical methods are, there is always unpredictable market risk. The correlation between the Bitcoin market and traditional assets is not constant, and sudden economic, policy, or security events can disrupt technical trends. Therefore, investors should make rational investments: pay attention to position management, avoid blindly chasing highs or selling off, and flexibly adjust strategies. When bullish sentiment is high, be alert to correction risks brought about by technical indicators divergence; when the market is overly panicked, also be cautious of bottom-fishing traps. In summary, the trend of Bitcoin prices is driven by multiple factors, and various analysis methods complement each other. Understanding and integrating these methods helps to better seize opportunities in volatile markets, but always remember the market’s uncertainty and be prepared for risk hedging and stop-loss.