Understanding Bitcoin’s price action begins with understanding where bitcoin fits in the financial market, for the sake of simplicity let’s imagine the entire financial market as a pool filled with different assets that you can invest in. In the shallow end of the pool you’ll find low risk low reward investments like goverment bonds, when you buy a government bond what you’re essentially doing is giving a loan to the government, governments sell bonds to private investors and even other countries so that they can spend more money in exchange the government in question promises to pay back the money they were given plus a small amount of interest within a 10 to 30 year period.
Government bonds are considered a low risk investment because governments make their money by takin git by force from their citizens via taxation which is not surprisingly a reliable source of income in the middle part of the financial market pool you’ll find medium risk, medium reward investments such as value stocks these are stocks that trade at or below their fare value relative to a company’s profit so for example if guys gentlemen’s club is making one billion dollars per year and the total value of all ggc stock in circulation is also one billion dollars it would be considered a value stock.
By contrast growth stocks are stocks which trade high above the fair value relative to a company’s profit, Tesla is a great example of a growth stock, value stocks are considered medium risk medium reward because their fate rests on the shoulders of the companies they represent, unlike governments companies must provide valuable services to make money and their profits are not guaranteed to grow since it’s not possible to simply take more money by force from customers.
Consider the chain of events that followed an announcement like that for many BTC holders the Tesla announcement was a watershed moment and was also probably the strongest buy signal bitcoin has ever had, naturally the BTC price started to rise and this positive price action accelerated in the days that followed as new inexperienced investors started to fomo into bitcoin, greedy crypto traders on futures exchanges started to add leverage to their positions for what they probably thought would be a clean move to 100K.