Bitcoin
Bitcoin Hits New All-Time High Near $69,000 Before Falling
Bitcoin (BTC-USD) reached an all-time high on Tuesday before falling as some investors locked in their gains.
A new frenzy around the world’s largest cryptocurrency pushed the price to $68,869, surpassing the previous high of $68,789 set on November 10, 2021. It then fell below the $60,000 level again in a matter of hours .
The new rally reinforced a remarkable comeback for bitcoin after the 2022 crash that created huge losses for investors and triggered the downfall of several major industry players, including cryptocurrency exchange FTX and its founder Sam Bankman-Fried.
The dramatic pullback from Tuesday’s rally was a reminder of how much volatility still surrounds this digital asset. At one point it fell 11%, the kind of drop last seen during the tumult of 2022.
So far this year, bitcoin has ridden a wave of enthusiasm sparked by a series of spot bitcoin exchange traded funds which began trading in January. These funds gave ordinary investors broad exposure to the digital asset, triggering anticipation of a record year.
See more information: With bitcoin nearing $69,000, does it deserve a place in your portfolio?
“Demand for these ETFs has far exceeded anyone’s expectations,” Matt Hougan, chief investment officer at Bitwise Asset Management, told Yahoo Finance. Bitwise was among the companies that got the green light from the Securities and Exchange Commission to manage one of these funds.
Several money managers are now predicting that the digital asset could rise above $100,000 before the end of 2024.
Investors are also bidding higher for other cryptocurrencies and related stocks. Ether (ETH-USD), the second-largest cryptocurrency, has outperformed bitcoin by more than 7% since the start of the year. Various so-called meme currencies – such as dogecoin (DOGE-USD), shiba inu (SHIB) and dogwifehat (WIF) – are also increasing.
One sign of the new craze surrounding bitcoin is the ETF trading activity launched in January. They raised nearly $8 billion from investors in just two months, with most of it going to Wall Street heavyweights like BlackRock (BLACK) and Fidelidade Investimentos.
This activity has been a boon for major crypto trading venues, including Coinbase (COIN) and Robinhood (HOOD). Coinbase is the crypto custodian for several of these ETFs and receives fees tied directly to these products.
O demand for negotiation on Coinbase was so intense last week that it resulted in a mess in which some customers showed $0 balances in their accounts for part of a day. CEO Brian Armstrong offered assurances to customers that their funds were safe.
The story continues
Some individual customers reported seeing zero balances in their accounts again on Monday.
Brian Armstrong, CEO of Coinbase. (Brendan McDermid/REUTERS) (REUTERS/Reuters)
Supply and demand
There is also a basic law of economics at play in new market frenzy around bitcoin: supply and demand. The new demand for ETFs means that, on average, more bitcoins are being purchased each day than new coins are being created.
The new ETFs have been buying a daily average of 3,320 to 4,300 coins since the beginning of February, three analysts working for cryptocurrency managers said last week.
This is considerably more than the 900 coins created daily by the Bitcoin network in the same period.
More supply issues are expected for bitcoin this year due to the halving scheduled to take place 46 days from Monday.
When it was created in 2009 by pseudonymous developer Satoshi Nakamoto, bitcoin was programmed with a fixed supply schedule that is cut in half every four years.
After the next cut, the so-called halving, the daily supply of new coins will be 450 instead of 900.
“We are potentially in the sweet spot here,” Mark Connors, head of research at crypto asset manager 3iQ, told Yahoo Finance. “We cannot produce more bitcoin to meet demand.”
Connor’s company has set its mid-to-high price target for bitcoin this year at between $160,000 and $180,000. Next year, she predicts a staggering target of $350,000 to $450,000 per coin.
Another money manager, VanEck, set a 2024 price target of $80,000 for bitcoin last quarter.
“These estimates are a little stale now,” said Matthew Sigel, head of digital asset research at VanEck.
There are certainly other factors at work in the current supply crisis besides the demand for ETFs.
One example: The US government has seized 215,000 BTC since 2020, according to data tracked by 21Shares. The stockpile includes confiscations in several seizures, such as the 2016 hack of cryptocurrency exchange Bitfinex.
The fact that they are only held and not sold currently has restricted supply. But this could change when the government needs to distribute part of this amount to victims, which could mean selling.
As asset prices rise, many institutional buyers will also need to take profits to maintain balance in their portfolios. This could also impact the imbalance between supply and demand.
There are also certainly less fundamental and more psychological factors driving this new recovery, including the fear of missing out.
Interest in bitcoin among the general U.S. population is far from its peak compared to previous highs, Alex Thorn, head of research at Galaxy Digital, said in an email on Monday.
Google searches for “bitcoin” and retail crypto app usage remain well below levels seen during the last bull market, according to Thorn.
“We haven’t even begun to reach the level that this is likely to reach,” Thorn added.
David Hollerith is a senior reporter at Yahoo Finance, covering banking, crypto and other areas of finance.
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