Bitcoin
Bitcoin Briefly Jumps to All-Time High Price
NEW YORK (AP) — Bitcoin reached an all-time high less than two years after the FTX crypto exchange collapse It has seriously damaged faith in digital currencies and caused prices to plummet.
The biggest in the world cryptocurrency has jumped 4% this week and briefly surpassed $68,800 on Tuesday, according to CoinMarketCap. This is slightly above Bitcoin’s previous record set in November 2021.
The volatile asset soon fell a bit, sitting at just under $62,000 at 3 pm ET, but the price was still up more than 175% from a year ago.
Gains in recent months have been fueled by anticipation and eventual US approval, of bitcoin exchange-traded funds earlier this year, which provided access to a much broader class of investors. The price of bitcoin has risen around 60% since the approval of bitcoin ETFs in January, a easy way to invest in assets or a group of assets – such as gold, junk bonds or bitcoins – without having to directly purchase the assets themselves.
Also boosting prices is what is known as a bitcoin “halving,” expected in April. Halvings reduce the rate at which new coins are mined and created, thus decreasing 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 ETFs from asset managers including Blackrock, Invesco and Fidelity. These newly approved ETFs hold actual bitcoin – unlike previous bitcoin-related ETFs that were invested in contracts related to future price bets, but not the cryptocurrency itself.
Although regulators pointed to lingering risks and maintained reluctance surrounding the January decision, the green light marked a major victory for the crypto industry.
Institutional demand for bitcoin “shows no signs of slowing,” HC Wainwright’s Mike Colonnese and Dylan Scales wrote on Tuesday — adding that bitcoin’s popularity “will likely accelerate in the coming months as more money management platforms equity make spot ETFs (bitcoin) accessible to their clients.”
Using data from crypto platform BitMEX, Colonnese and Scales estimated that the 10 bitcoin ETFs averaged $302 million in daily net inflows in the month of February. Last week alone, these spot ETFs saw record inflows of $1.7 billion – bringing total net inflows to $7.5 billion since their launch on January 11.
HALF ON THE HORIZON
The increase in demand is also in line with the upcoming Bitcoin halving event, which is scheduled for the end of April.
The Bitcoin halving, which occurs every four years, occurs when the reward for mining Bitcoin is halved. This reduces how quickly new coins are created – making supply scarcer.
While analysts say tight supply at a time of high demand could increase the price of bitcoin over time, others point to significant volatility that resulted before and after the halving events — and the possibility of sizable declines.
“Past history may not be a reliable guide for predicting how bitcoin’s next halving will influence its value,” noted Rajeev Bamra, senior vice president of digital finance at Moody’s Investors Service. “Several external factors, changes in market sentiment and regulatory developments can influence the trajectory of Bitcoin’s price.”
A STORY OF VOLATILITY
Bitcoin has a history of drastic swings in value – which can occur suddenly and happen over the weekend or overnight in trades that continue at any time, every day.
Bitcoin soared from just over $5,000 at the start of the pandemic to its peak of nearly $69,000 in November 2021, in a period marked by a increase in demand for technology products. Prices fell during an aggressive series of Federal Reserve rate hikes designed to cool inflation, slow money flows and make risky investments potentially riskier. Then came 2022 FTX collapsewhich significantly undermined trust in cryptography.
Early last year, a single bitcoin could be purchased for less than $17,000. Investors, however, began returning in large numbers as inflation began to cool. And the collapse of 2023 prominent technology-focused banks in fact, it led more investors to turn to crypto as they redeemed positions in Silicon Valley start-ups and other risky bets.
Despite the recent excitement surrounding bitcoin, experts still argue that crypto is a risky bet with extremely unpredictable value fluctuations. In short, investors can lose money as quickly as they make it.
“It is essential to exercise caution and recognize that the path forward for the digital financial ecosystem, especially the crypto markets, will have to navigate through a period marked by volatility,” noted Bamra – pointing out the importance of “cautious optimism.”