Bitcoin Surges Past $47,000. Can It Climb Higher?

Here are four reasons why Bitcoin is soaring today.

Bitcoin (BTC) has been in the doldrums so far this year. Uncertain economic and geopolitical conditions pushed the lead crypto's price down as much as 50% from its November highs. But that might be changing.

Bitcoin just surged past $47,000 -- the highest it's been since the start of the year. It has gained over 25% in the past two weeks, according to data from CoinGecko. Other top cryptos, such as Ethereum (ETH), have seen similar gains. Ethereum is up over 30% in the past two weeks. So what's driving these price gains and can the rally continue?

What's driving Bitcoin's soaring price?

There are several factors that could be contributing to Bitcoin's price gains. These include the following:

1. Terra's Bitcoin buying spree

Terra (LUNA) announced in March it would buy $10 billion worth of Bitcoin as part of a plan to build a reserve fund behind its UST stablecoin. It plans to start by buying $3 billion of Bitcoin in the short term and gradually add a remaining $7 billion in the longer term. According to reports, the foundation behind Terra is buying batches of $125 million at a time. This has contributed significantly to the price increase.

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2. Market sentiment turning positive

Sentiment is often a big driver in cryptocurrency prices. One consequence of the fact that cryptocurrency is a relatively new and unregulated industry is that it can be hard to get accurate and reliable information. This means investor confidence and sentiment can have a bigger impact on price than, for example, in the stock markets.

According to the Crypto Fear and Greed Index, which uses a number of indicators to track crypto sentiment, confidence in crypto is at the highest level it's been all year. Last week we were still in "fear" territory. Yesterday we moved to "neutral" and today we moved into "greed" with the highest score the index has registered since November.

3. Russia, crypto, and sanctions

It isn't yet clear how much Russia will be able to use crypto to avoid sanctions. But the fact that the country is considering accepting crypto payments for oil and gas suggests that crypto investors can't ignore this issue. Russia's invasion of Ukraine has prompted harsh sanctions from various countries, and some people -- including senator Elizabeth Warren -- worry that Russian oligarchs might be able to use digital currencies to hide a portion of their wealth. Sanctions apply to cryptocurrencies as well. But it seems ordinary Russians have turned to cryptocurrency to protect themselves against a falling ruble. We don't yet know whether the country's billionaires have been able to do the same.

4. Continued strides in crypto adoption

Cryptocurrency took a number of steps toward the mainstream last year. These include increased institutional acceptance and a higher number of retail investors. According to Pew Research, 16% of Americans have now traded or used crypto in some way. Most recently, Goldman Sachs became the first major U.S. bank to trade crypto over the counter, marking another key milestone for crypto adoption.

Can Bitcoin climb higher?

Nothing is certain. Some analysts believe Bitcoin's price will increase in the long term while others continue to argue the market will collapse. Among the optimists, you'll find predictions that Bitcoin could hit $100,000 by the end of this year as well as those who argue it could be worth $1 million by 2030. In truth, Bitcoin's price is extremely difficult to predict because there are so many variables and so little solid ground. The important thing is to only invest money you can afford to lose and ensure Bitcoin is part of a balanced overall portfolio. That way you won't face financial ruin if the crypto market collapses, but you'll also be positioned to benefit from any price gains.

Crypto is a volatile asset, but so far it has always eventually regained its highs and gone on to supersede them. The fact that Bitcoin has rallied and made up for this year's losses is a positive sign. But if you're a long-term investor, these relatively short-term price fluctuations are unlikely to have a big impact on your investment activity. Viewing your investments through a long-term lens makes it easier to keep even substantial price drops in perspective.

As to whether Bitcoin's price could climb higher in the short term, investor caution is recommended. Bitcoin may continue to increase in the coming weeks, but it may not. There's so much uncertainty, and it's just too early to know if this is a temporary jump or the start of a sustained increase.

For example, we're likely to see increased crypto regulation in the U.K. and Europe. Plus, the Federal Reserve continues to take steps to curb inflation and there are warnings of a possible recession. In addition, we don't know how the Russia crisis will develop, nor how that might impact the crypto market. The recent price jump is reassuring for investors, but it is too early to start counting chickens.