Bitcoin (BTC +0.40%) just surged past the $120,000 mark, setting yet another all-time high. Bitcoin is now up more than 28% for the year, and could be ready to soar even higher in the second half of the year.
While Bitcoin's upward ascent might seem inevitable to many, there was actually a period in April when the cryptocurrency's price trajectory was very much in doubt. Bitcoin fell from a (then) all-time high of $110,000 to nearly $70,000. It has now fully recovered, and appears to be stronger than ever. So how did we get from there to here, in such a short period of time?
Institutional demand
The biggest factor in Bitcoin's favor has been robust demand from institutional buyers. The easiest way to see this in action is by tracking inflows (and outflows) of the spot Bitcoin exchange-traded funds (ETFs). During the peak of tariff uncertainty, money actually started to flow out of these ETFs, and the price of Bitcoin fell accordingly. But then, in early May, flows reversed again, with institutional investors once again placing their faith in Bitcoin.
Image source: Getty Images.
At the same time, an entirely new source of demand has emerged: the Bitcoin treasury company. Around the world, companies are loading up on Bitcoin for their balance sheets. In the U.S., the best example is Strategy, the company formerly known as MicroStrategy. In Japan, there's Metaplanet. In Europe, there's The Blockchain Group.
What's particularly fascinating is that some companies in industries not even tangentially related to crypto appear to be abandoning their prior business models entirely as they refocus on Bitcoin. There are medical device companies buying Bitcoin. There are luxury watchmakers buying Bitcoin. There are real estate companies buying Bitcoin. And there are social media companies now buying Bitcoin.
Crypto-friendly policies
The other big factor in Bitcoin's favor has been strong support from the Trump administration. This goes far beyond just showing up at Bitcoin events in Las Vegas, or hosting crypto summits at the White House.
The Trump administration is actually starting to draft legislation for the crypto market. The first step was the debut of new stablecoin legislation. The next step will be the passage of broad crypto market legislation, clearly laying out the rules of the road for different crypto assets, similar to what already exists in Europe.
After that, it's likely that we'll see passage of new legislation that codifies the Strategic Bitcoin Reserve into law. When President Donald Trump signed the executive order in March, there was only a broad framework for how such a reserve would function. So it's important to sign into law something along the lines of the Bitcoin Act of 2025, which has already been introduced by Senator Cynthia Lummis (R-Wyoming).
Market sentiment
The third and final piece of the puzzle is market sentiment. This has the power to move markets up or down extremely quickly. Right now, investors are buoyant. Equity markets are at all-time highs, Bitcoin is at an all-time high, and Nvidia just became the first company to hit a $4 trillion market valuation.
CRYPTO: BTC
Key Data Points
With all of this good news pouring in, it's easy to forget about tariffs, inflation, the national debt, or budget crises. It's easy to downplay geopolitical risk in Ukraine or the Middle East. And so the market keeps going up.
If you look at the CoinMarketCap crypto Fear and Greed Index, which measures sentiment in the crypto market, the overall sentiment has primarily been neutral since the end of April. In fact, on some days, the Fear and Greed Index was giving a reading of 50, which is exactly halfway between "extremely fearful" and "extremely greedy."
Today, with Bitcoin pushing above $120,000, the reading has suddenly flipped to 70. This pushes Bitcoin out of "neutral" territory and into "greed" territory. Investors are now lining up to buy Bitcoin.
Will Bitcoin continue its ascent?
These three factors explain why Bitcoin has regained its mojo. And they also provide a very useful framework for understanding what could power Bitcoin higher during the coming months.
The key factor here is likely market sentiment. Tariffs had been off the radar for some time, but now they're back. It looks like the "90 Deals in 90 Days" strategy has been replaced with a new "We'll send you a letter stating just how high your tariffs are going to be, and you're going to like it" strategy. Right now, Canada is staring at 35% tariffs, and Brazil is facing potential 50% tariffs.
With that in mind, I'm keeping my eye on the crypto Fear and Greed Index. As long as it remains in positive territory, Bitcoin will likely move higher. However, if the tariff situation still hasn't been resolved by the end of summer, that's when the sentiment index might reverse direction, and investors might start taking some money off the table.
