The price of bitcoin has surged to a record high, continuing its rapid resurgence that began in late 2023.
Bitcoin reached $68,818 early Tuesday morning, surpassing its $44,000 valuation at the beginning of the year by a significant margin. This surge in Bitcoin’s price has also contributed to the increase in the prices of other popular cryptocurrencies like ether and Solana throughout the week.
The rally in Bitcoin’s price is fueled by several factors
According to cryptocurrency experts. One key factor is the growing demand for spot bitcoin exchange-traded funds (ETFs), which provide investors with a less risky way to invest in crypto. These ETFs have attracted a substantial amount of investment capital this year, driving up demand for Bitcoin.
“Investors are increasingly attracted to bitcoin as an uncorrelated asset, making it an appealing option for portfolio diversification,” explained Joel Kruger, a market strategist at digital currencies exchange LMAX Group, in an interview with CBS MoneyWatch.
Spot bitcoin ETFs allow investors to gain direct exposure to bitcoin without physically holding it. Unlike regular bitcoin ETFs, where bitcoin futures contracts are the underlying asset, spot bitcoin ETFs hold actual bitcoins as their underlying assets. Each spot bitcoin ETF is managed by a firm that issues shares of its own bitcoin holdings purchased through other holders or authorized cryptocurrency exchanges. These shares are subsequently listed on conventional stock exchanges.
The U.S. Securities and Exchange Commission (SEC) approved the sale of spot bitcoin ETFs in January, leading to a significant influx of investment into these funds. According to Bloomberg, investors have deposited approximately $7.35 billion into the 11 different spot bitcoin ETFs available. Major institutional investors such as BlackRock and Fidelity Investments now offer spot bitcoin ETFs as well.
Bitcoin’s price rally began months earlier in 2023, reaching a 19-month high of around $41,000 in December. Analysts attributed this surge to several factors, including anticipation of the SEC’s approval of spot ETFs, expectations of Federal Reserve rate cuts in 2024, and the upcoming bitcoin halving event, in which the mining reward for bitcoin is halved.
However, despite its recent surge, bitcoin remains highly volatile, as noted by Laila Maidan, an investing correspondent at Insider. Maidan emphasized that the cryptocurrency’s price fluctuations are unpredictable, and investors should exercise caution.
Nevertheless, bitcoin’s resurgence is positive news for crypto investors, many of whom experienced significant losses in 2022 following the collapse of FTX and other crypto exchanges. As the world’s largest cryptocurrency by trading volume and market capitalization, bitcoin is often regarded as a key indicator of the overall health of the crypto industry.