Bitcoin’s recent surge has set new all-time highs, bringing the digital asset back into the spotlight. The rise is primarily attributed to investments by institutional investors, increased public interest, and network activity. With Bitcoin’s 24-hour trading volume reaching a three-year high of $43.45 billion, its dominance in the cryptocurrency market approached 60%.
This increased activity demonstrates the health of the Bitcoin network, as the number of transactions on the network has risen significantly. Glassnode data shows a strong correlation between Bitcoin’s price and transaction volume, with an increase in transactions indicating increased acceptance and use of the cryptocurrency.
Increased demand for Bitcoin also results in greater security as more actors participate in the decentralized network. However, a rising exchange rate can temporarily cause network congestion or high transaction fees. Bitcoin’s price rise and the increased interest in the digital asset can be explained by the Veblen goods phenomenon, where demand for a product increases as its price increases.
This can be seen in luxury goods and assets like Bitcoin. As the exchange rate increases, more buyers are attracted, while a falling exchange rate often creates panic and leads to quick exits from the investment instrument. In summary, Bitcoin’s recent surge in popularity and price is fueled by institutional investments, public interest, and network activity, while the correlation between its price and transaction volume highlights the self-exciting nature of the digital asset’s demand.