Bitcoin Rally Causes Massive Surge in Self-Custody Wallet Demand

Some of the key drivers in BTC’s price include Bitcoin’s fourth halving, reduced global interest rates, and Donald Trump’s presidential election win. Investors are also withdrawing Bitcoin from exchanges, which suggests people are shifting toward self-custody. Bullish sentiment is among options traders, and many believe BTC could hit $150,000 by 2024’s end. However, analysts warned of potential pullbacks due to market volatility and a strengthening U.S. dollar. Meanwhile, Brazil proposed a Sovereign Strategic Bitcoin Reserve to improve its financial stability.

Self-Custody Gains Momentum as BTC Approaches $100K

The self-custody trend in cryptocurrency has gained a lot of  momentum. This momentum is mostly driven by Bitcoin’s recent rally toward the $100,000 mark. In fact, hardware wallet provider Trezor reported a massive 600% spike in weekly wallet sales, which coincided with Bitcoin reaching its all-time high of $99,645 on Nov. 22. On the same day, Trezor achieved its highest single-day sales.

The surge in demand for self-custody solutions like Trezor wallets can be attributed to multiple factors, including the outcome of the recent United States presidential election. Donald Trump’s victory started a pivotal shift in the regulatory approach toward cryptocurrencies, moving away from a hostile stance to a much more supportive environment. 

This regulatory clarity boosted institutional adoption and created a favorable operating landscape for crypto businesses, according to Trezor’s chief commercial officer, Danny Sanders. However, despite the election’s influence on the broader crypto market, Trezor did not observe a big change in the proportion of its sales originating from the United States.

Beyond the election, Bitcoin’s fourth halving in April 2024 and broader macroeconomic factors also contributed to the ongoing market rally. Historically, Bitcoin’s price tends to surge roughly six months after a halving event. Additionally, central banks in the United States and Europe reduced interest rates, which increased liquidity in the crypto market and further drove Bitcoin’s price upward.

Bitcoin exchange reserves (Source: CryptoQuant)

This renewed interest in crypto also led to a noticeable shift in investor behavior, as there has been a large reduction in Bitcoin reserves on centralized exchanges. CryptoQuant data reveals that 427,000 BTC, which is worth approximately $40 billion, have been withdrawn from exchanges in 2024, leading to the lowest exchange reserves in six years. 

Bitcoin Traders Bet on $150K by End 2024

Almost half of Bitcoin options traders believe Bitcoin could hit a six-figure price by the end of 2024. Some even projecting a surge to $150,000 despite BTC’s recent pullback to just above $90,000, according to on-chain data. The likelihood of Bitcoin surpassing $100,000 rose to 45%, up from 34% the previous week. There is also a 4% probability of BTC surpassing $150,000, according to Nick Forster.

Forster shared that there is strong demand for Bitcoin options, particularly call contracts, which indicates market confidence in Bitcoin’s upward potential. Data from Derive shows that 41.3% of contracts traded were calls, compared to 38.3% for puts, suggesting limited selling pressure. These options allow traders to speculate on Bitcoin’s future price movements. Calls provide the right to buy while puts provide the right to sell at a predetermined price.

Currently, Bitcoin is trading hands at $93,855. Data suggests there is a 68% chance of Bitcoin fluctuating between $81,493 and $115,579 by the end of 2024, with only a 5% likelihood of it falling below $70,000 or reaching as high as $137,645. Despite the bullish sentiment, some analysts warn of potential pullbacks.

Ki Young Ju, the CEO of CryptoQuant, pointed out that even during parabolic bull runs, Bitcoin can experience corrections of up to 30%. Ju specifically mentioned the 2021 bull cycle, where similar pullbacks happened as Bitcoin rose from $17,000 to $64,000. He urged investors to manage risk and avoid panic selling.

Meanwhile, analyst PlanC is optimistic about Bitcoin consolidating in the $90,000 range. He suggested that a period of stability at this level will benefit the longevity of the bull market, and could potentially set the stage for future growth.

Strong Dollar Could Pressure Bitcoin Rally

Bitcoin’s price movement may face a retracement toward $70,000 if it continues to follow its historical correlation with the global money supply in cash and bank deposits, according to analyst Joe Consorti. In a recent post, Consorti shared that Bitcoin has been tracking global M2, which is an estimate of cash and short-term bank deposits, with a 70-day lag since September of 2023. This trend is consistent with previous bull runs, which suggests that Bitcoin’s price increases often align with the growth of the M2 money supply as investors hedge against inflation during periods of liquidity expansion.

While Consorti noticed that the correlation has been “shockingly accurate,” he also mentioned that Bitcoin could experience a 20-25% correction before resuming its path to $100,000. Macroeconomist Lyn Alden previously reported that Bitcoin aligns with global liquidity trends 83% of the time over a 12-month period. 

However, not all analysts agree with this assessment. Market commentator David Quintieri dismissed the reliability of tracking Bitcoin against M2, and argued that its volatility makes comparisons like these less meaningful. Meanwhile, Glassnode analyst James Check attributed some of the M2 decline to the strengthening of the U.S. dollar. Crypto commentator Sam KB also questioned why Bitcoin continues to rally despite M2 nearing its lowest point this cycle.

Some analysts warned that President-elect Donald Trump’s proposed tariffs on imported goods could strengthen the U.S. dollar even more. Historically, a strong dollar places pressure on risk assets like Bitcoin. Hedge fund manager Scott Bessent said that tariffs generally result in a stronger dollar, which could introduce additional headwinds for Bitcoin’s price growth.

Brazil Proposes Sovereign Bitcoin Reserve

A newly proposed bill in Brazil’s Congress wants to establish a Sovereign Strategic Bitcoin Reserve, known as RESBit. This could potentially transform the nation’s approach to digital assets. 

The bill was introduced on Nov. 25 by Congressman Eros Biondini, and outlines the creation of a Bitcoin reserve to protect the country’s sovereign assets from currency fluctuations and geopolitical risks. The reserve will also serve as collateral for Brazil’s upcoming central bank digital currency, the Real Digital (Drex).

Brazil currently holds $355 billion in sovereign reserves, primarily backed by global fiat currencies like the U.S. dollar. The proposed legislation suggests complementing these reserves with Bitcoin, and will limit BTC holdings to a maximum of 5% of the total reserves through phased purchases. Management of the Bitcoin reserve will remain under the country’s central bank, and will be overseen by a technical advisory committee of security experts.

The bill draws its inspiration from El Salvador, which adopted Bitcoin as legal tender in 2021. El Salvador’s government has since accumulated close to 6,000 BTC, which is valued at $558 million. 

El Salvador cold wallet (Source: Arkham)

Brazil has been making it a priority to advance its regulatory framework for digital assets. In June of 2023, the country introduced laws granting its central bank authority over virtual asset service providers, while tokens classified as securities remain under the purview of the Securities and Exchange Commission. 

The proposed Bitcoin reserve legislation is currently under review by the Speaker of Brazil’s House of Representatives. If approved, it will move to committees for further debate.