Bitcoin Reaches New All-Time High of $68,800, Surpassing Previous 2021 Record
The world’s largest cryptocurrency, Bitcoin, has hit a new all-time high less than two years after the collapse of crypto exchange FTX severely damaged faith in digital currencies and sent prices plunging. According to CoinMarketCap, Bitcoin has surged 4% this week, briefly surpassing $68,800 on Tuesday, exceeding its previous record set in November 2021. Though the price has slightly fallen to just under $62,000, it still reflects a remarkable increase of over 175% from one year ago.
Gains Driven by Bitcoin ETF Approvals and Anticipation of Halving
The recent price gains of Bitcoin have been fueled by two significant factors. Firstly, the approval of Bitcoin exchange traded funds (ETFs) in the United States earlier this year has granted access to a broader class of investors. Bitcoin ETFs enable investors to invest indirectly in assets like gold, junk bonds, or bitcoins without directly purchasing the assets themselves. Since the approval of Bitcoin ETFs in January, Bitcoin’s price has surged by approximately 60%.
Secondly, the anticipated Bitcoin “halving” event in April has also contributed to the price increase. Halving events occur every four years and involve reducing the rate at which new coins are mined, ultimately reducing the supply and making Bitcoin scarcer.
Early Success of Bitcoin Spot ETFs
In January, the U.S. Securities and Exchange Commission approved the first spot Bitcoin ETFs, backed by actual Bitcoin, from asset managers such as Blackrock, Invesco, and Fidelity. This approval marked a significant win for the crypto industry, as it allowed wealth management platforms to offer Bitcoin ETFs to their clients. According to data from crypto platform BitMEX, these spot ETFs have seen substantial daily inflows, with an estimated average of $302 million in net inflows for the month of February. The increasing popularity of Bitcoin ETFs resulted in a record inflow of $1.7 billion last week, accumulating total net inflows of $7.5 billion since their launch in January.
Halving on the Horizon
Bitcoin’s next halving event, expected at the end of April, is creating further demand for the cryptocurrency. As supply is reduced, the potential for a higher price is amplified. However, analysts warn of the significant volatility that has been observed before and after halving events, stating that Bitcoin’s value is influenced not only by historical patterns, but also by varying external factors, shifting market sentiment, and regulatory developments.
A History of Volatility
Bitcoin has a reputation for significant value fluctuations, which can occur abruptly and unexpectedly, even during weekends or overnight trading. During the pandemic, Bitcoin skyrocketed from just over $5,000 to a peak of nearly $69,000 in November 2021 due to increased demand for technology products. However, prices crashed due to Federal Reserve rate hikes aimed at controlling inflation, decreasing money flow, and discouraging risky investments. The collapse of FTX in 2022 also severely undermined confidence in the crypto market. Nevertheless, during the past year, investors have returned, and the subsequent collapse of tech-focused banks in 2023 further prompted investors to turn to crypto as a refuge from risky investments.
Experts caution that despite the recent surge, crypto remains a risky investment with unpredictable fluctuations in value. It is vital for investors to exercise caution and approach the crypto market with mindful optimism.
