NEW YORK — NEW YORK (AP) — Bitcoin has hit an all-time high, less than two years after the collapse of cryptocurrency exchange FTX severely damaged confidence in the digital currency and sent its price plummeting. .
The world's largest cryptocurrency soared 4% this week, briefly surpassing $68,800 on Tuesday, according to CoinMarketCap. This is slightly higher than Bitcoin's all-time high set in November 2021.
The volatile asset quickly lost some ground, sitting at just under $62,000 as of 3pm ET, but the price is still up more than 175% from a year ago.
Gains in recent months have been fueled by the anticipated and eventual approval of a Bitcoin exchange-traded fund in the United States earlier this year, making it accessible to a broader investor base. Since the Bitcoin ETF was approved in January, the price of Bitcoin has increased by about 60%. Bitcoin ETFs are an easy way to invest in an asset or group of assets (gold, junk bonds, Bitcoin, etc.) without purchasing the asset itself directly.
Bitcoin's expected “halving'' in April is also pushing up prices. Halving slows down the rate at which new coins are mined and created, reducing the supply.
Here's what you need to know:
Early success of Bitcoin Spot ETFS
In January, the U.S. Securities and Exchange Commission approved the first spot Bitcoin ETF from asset managers including BlackRock, Invesco, and Fidelity. These newly approved ETFs hold actual Bitcoin, unlike previous Bitcoin-related ETFs, which were invested in contracts related to bets on future prices, rather than the cryptocurrency itself. .
Although regulators were reluctant to make the decision in January, citing continued risks, the green light is a major victory for the crypto industry.
Wainwright HCs Mike Colonese and Dylan Scales wrote on Tuesday that institutional demand for Bitcoin shows “no signs of slowing down,” and that Bitcoin's popularity is driving “more asset management platforms into the spotlight.” “This is likely to accelerate in the coming months as we gain access to (Bitcoin) ETFs.” client. ”
Using data from crypto platform BitMEX, Colonese and Scales estimated that 10 Bitcoin ETFs had average daily net inflows of $302 million in February. Last week alone, these spot ETFs saw record inflows of $1.7 billion, bringing their total net inflows since their inception on January 11th to $7.5 billion.
cut in half on the horizon
The increase in demand also coincides with Bitcoin's next halving event, expected at the end of April.
Bitcoin halving occurs every four years, and the rewards for Bitcoin mining are cut in half. This slows down the rate at which new coins are created and creates a shortage of supply.
Analysts note that limited supply at a time of high demand could push Bitcoin's price higher over time, while creating significant volatility around the halving event, leading to significant Some people point out the possibility of a decline.
Rajeev Bumrah, senior vice president, digital finance, Moody's Investors Service “It may not be a reliable guideline.” “A variety of external factors, changes in market sentiment, and regulatory developments can impact the trajectory of Bitcoin price.”
History of volatility
Bitcoin has a history of rapid fluctuations in value. This can happen suddenly, on weekends or at night, with trades that last every hour of the day.
Bitcoin has soared from just over $5,000 at the start of the pandemic to a peak of nearly $69,000 in November 2021, during a period marked by a surge in demand for technology products. Prices collapsed during a series of aggressive interest rate hikes by the Federal Reserve aimed at cooling inflation, slowing the flow of money and making risky investments potentially more dangerous. Then, in 2022, his FTX collapsed, greatly eroding trust in cryptocurrencies.
At the beginning of last year, one Bitcoin was available for less than $17,000. But as inflation began to subside, many investors began to return. And the collapse of a prominent tech-focused bank in 2023 prompted more investors to turn to cryptocurrencies to escape Silicon Valley startups and other risky bets.
Despite the recent excitement surrounding Bitcoin, experts still maintain that the cryptocurrency is a risky bet with large and unpredictable fluctuations in value. This means that even if investors make money, they can lose it quickly.
“It is important to exercise caution and recognize that the future path forward for the digital financial ecosystem, and in particular the crypto market, is expected to pass through periods marked by volatility,” Bumrah noted. He pointed out the importance of “optimism.”
