Why has Bitcoin suddenly taken off?

July has been a golden month for Bitcoin. In just the first two weeks, the cryptocurrency has appreciated more than 10%, surpassing the $120,000 barrier. Ethereum, Ripple, Dogecoin, Solana, and others have followed suit. Overall, the market seems to have gone into euphoria, but this time without the help of the S&P 500 index.

So what exactly has triggered this optimism?

On the one hand, concerns about the devaluation of the U.S. dollar have been increasing, especially after the recent budget bill, which is expected to add trillions to the national debt. In addition, there is a risk that the Fed will lose some of its independence, making investors more inclined to look for alternatives to the dollar.

For context, although US inflation has cooled in recent months, Jerome Powell remains unwilling to cut interest rates. Not even Donald Trump's mounting pressure to do otherwise is helping. The Fed chief remains cautious for one simple reason: he fears that ongoing trade wars could reignite US inflation.

But the Trump administration doesn't seem to want to give up on the idea of forcing an earlier and deeper rate cut, constantly pushing the idea of replacing Powell. Now, if that were to happen, it could shake confidence in the dollar and reduce demand for U.S. Treasuries, giving bitcoin even more appeal as a hedge.

A second possible reason for the Bitcoin rally could be the hope that in China, regulatory pressure on the cryptocurrency sector will ease. Last week, regulators in Shanghai (China's financial center) held a meeting with local officials to explore strategic responses to stablecoins and digital currencies.

For context, the country banned cryptocurrency trading and mining in 2021, citing financial stability concerns. But if the government decides to change its stance on digital assets, it could open the door to a new wave of capital flowing into the cryptocurrency market, which would likely give a strong boost to prices.

Another factor could be the “Crypto Week” in the U.S. From July 14-18, Congress is scheduled to consider three important crypto-related bills: the CLARITY Act, the Anti-CBDC Surveillance State Act and the GENIUS Act. However, if regulation is passed, a “buy the rumor, sell the news” correction is not ruled out.

In the meantime, bullish forecasts are coming out from all sides. Standard Chartered, for example, expects Bitcoin to reach $200,000 by the end of 2025, while Robert Kiyosaki predicts it could soar to $1,000,000 by 2035. This is nothing new, but whether these forecasts are worth believing is another matter.