In recent weeks, Bitcoin has surged past the $60,000 mark, briefly climbing above $64,000 on February 29 — marking a gain of over 40% in just one month. This sharp rebound has reignited investor interest and sparked widespread debate: What’s fueling this rally? Is a new bull run underway? And more importantly, what risks lie ahead?
While the momentum appears strong, experts caution that beneath the surface, significant volatility and structural challenges remain. Let’s explore the key drivers behind Bitcoin’s resurgence, the evolving regulatory landscape, and the critical risks investors must consider.
What’s Driving the Current Bitcoin Rally?
After peaking near $69,000 in November 2021, Bitcoin entered a prolonged bear market. A confluence of factors — including the Federal Reserve’s aggressive rate hikes, high-profile exchange collapses, and tightening global regulations — sent prices tumbling to a low of around $16,000.
However, by late 2022, the market began stabilizing. According to Zhao Wei, Senior Researcher at OKX Intelligence, Bitcoin found a bottom and gradually entered a phase of consolidation and recovery as market sentiment improved.
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Several catalysts have since converged to push prices higher:
1. Bitcoin Spot ETF Approvals
On January 11, 2025, the U.S. Securities and Exchange Commission (SEC) approved 11 Bitcoin spot ETFs, including applications from major financial institutions like BlackRock. This landmark decision opened a regulated pathway for institutional and retail investors to gain exposure to Bitcoin without holding the asset directly.
Yu Jiaoning, Co-Chair of the Blockchain Committee at the China Communications Industry Association, notes:
“The approval of spot ETFs significantly lowers entry barriers for traditional investors. It enhances market liquidity and expands Bitcoin’s investor base.”
By February 17 — the 30th trading day post-launch — U.S. Bitcoin spot ETFs had recorded a net inflow of $3.317 billion, with total inflows reaching $49.269 billion since inception. This influx of capital has provided strong price support.
2. Anticipated Bitcoin Halving
Scheduled for mid-2025, the next Bitcoin halving will reduce block rewards from 6.25 to 3.125 BTC. Historically, halvings have preceded major price rallies due to reduced supply entering the market.
Dongwu Securities’ research team highlights that past cycles show a strong correlation between halvings and bullish trends — though they stress it's not a guaranteed trigger.
3. Macroeconomic Shifts
Growing expectations of Federal Reserve rate cuts in late 2025 have boosted risk appetite across markets. Lower interest rates typically favor high-growth or speculative assets like cryptocurrencies.
Additionally, increased leverage use in crypto derivatives markets can amplify short-term price moves. As Yu Jiaoning explains:
“In highly leveraged environments, rapid price increases can trigger cascading liquidations of short positions, further accelerating upward momentum.”
Regulatory Realities: Has the Stance on Crypto Softened?
The approval of Bitcoin spot ETFs led some to believe regulators are warming to cryptocurrencies. But experts warn against misinterpreting this development.
Gary Gensler, Chair of the SEC, clarified shortly after the ETF approvals:
“Approving an ETF is not an endorsement of Bitcoin. It remains a speculative and volatile asset.”
Key points to understand:
- ETFs are financial vehicles, not validations of underlying assets.
- Bitcoin is still classified as a high-risk, unregulated digital commodity in most jurisdictions.
- Regulatory oversight is increasing, not decreasing — ETF issuers face strict reporting and custody requirements.
Moreover, while ETFs bring institutional legitimacy, they don’t alter the fundamental regulatory status of direct crypto ownership or trading.
China’s Strict Stance Remains Unchanged
In September 2021, Chinese authorities issued a comprehensive ban on all cryptocurrency-related activities. The notice from the People’s Bank of China and other agencies states:
“Virtual currency-related business operations constitute illegal financial activities.”
“Overseas exchanges providing services to mainland residents via the internet are also prohibited.”
As Xiao Sa, Partner at Beijing Dacheng Law Firm, emphasizes:
“Mainland residents cannot legally purchase or trade Bitcoin ETFs or any crypto-linked products through domestic channels. Overseas platforms are barred from serving Chinese users.”
This underscores that despite global developments, China maintains one of the strictest regulatory postures in the world.
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Key Risks Investors Shouldn’t Ignore
Despite bullish momentum, several red flags remain.
1. Extreme Price Volatility
Bitcoin’s history is defined by dramatic swings. Double-digit percentage moves within hours are not uncommon. Such volatility makes it unsuitable for risk-averse investors.
2. Regulatory Uncertainty
While some countries embrace crypto innovation, others impose bans or restrictions. Any major policy shift — such as new tax rules or trading curbs — could trigger sharp sell-offs.
3. Cybersecurity Threats
Exchanges and wallets remain targets for hackers. High-profile breaches in past cycles wiped out billions in value overnight.
4. Market Manipulation & Leverage Risks
The crypto derivatives market operates with minimal oversight. Excessive leverage can lead to flash crashes or artificial pumps driven by whale activity.
5. Macroeconomic Sensitivity
Bitcoin is increasingly correlated with tech stocks and broader risk assets. Rising inflation, geopolitical tensions, or tighter monetary policy could dampen investor sentiment.
FAQ: Your Top Questions Answered
Q: Does the Bitcoin halving always lead to a price surge?
A: Not necessarily. While previous halvings were followed by bull runs, market conditions today are more complex. Factors like regulation, macroeconomics, and adoption play larger roles than supply reduction alone.
Q: Can I buy U.S.-listed Bitcoin ETFs from China?
A: No. Chinese regulations prohibit domestic investors from accessing overseas crypto financial products, including ETFs. Violating these rules may carry legal consequences.
Q: Are Bitcoin ETFs safer than holding Bitcoin directly?
A: They offer custodial security and regulatory oversight but come with management fees and tracking lag. You also don’t control the private keys — meaning you don’t truly “own” the asset.
Q: Is Bitcoin becoming part of mainstream finance?
A: Partially. Institutional adoption is growing through ETFs and treasury allocations (e.g., MicroStrategy). However, widespread integration into traditional banking systems remains limited.
Q: What happens if a major exchange fails again?
A: It could trigger panic selling and erode trust. That’s why using regulated platforms with proof-of-reserves and cold storage is crucial.
Q: How should I allocate Bitcoin in my portfolio?
A: Most financial advisors recommend no more than 1–5% for accredited investors comfortable with high risk. Never invest money you can’t afford to lose.
The Road Ahead: Beyond Speculation
Long-term industry leaders agree that digital assets must eventually serve real-world economic functions to achieve sustainable growth.
Yu Jiaoning argues:
“The future of digital assets lies in innovation that solves real problems — improving supply chains, enabling cross-border payments, or tokenizing real estate.”
Projects integrating blockchain with tangible use cases are more likely to survive market cycles than pure speculative tokens.
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Final Thoughts
Bitcoin’s recent rebound reflects renewed optimism driven by ETF adoption, halving anticipation, and favorable macro trends. Yet, regulatory headwinds, security concerns, and inherent volatility mean investors must proceed with caution.
While the asset continues gaining institutional traction, it remains far from mainstream acceptance — especially in regulated markets like China.
For those considering exposure, education, diversification, and risk management should be top priorities.
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