Bitcoin briefly hits all-time high
NEW YORK — Bitcoin hit an all-time high less than two years after the collapse of the crypto exchange FTX damaged faith in digital currencies and sent prices plunging.
The world’s largest cryptocurrency jumped 4% this week and briefly surpassed $68,800 Tuesday, according to CoinMarketCap. That’s just above bitcoin’s previous record set in November 2021.
The volatile asset soon fell some, standing at just under $62,000 as of 3 p.m. ET, but the price is still up more than 175% from one year ago.
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. Those newly approved ETFs hold actual bitcoin — unlike previous ETFs that were not invested in the cryptocurrency itself.
While regulators have pointed to risks and maintained reluctance around January’s decision, the greenlight marked a major win for the crypto industry.
Demand for bitcoin shows “no signs of slowing,” H.C. Wainwright’s Mike Colonnese and Dylan Scales wrote Tuesday — adding that bitcoin’s popularity “is likely to accelerate ... as more ... platforms make spot (bitcoin) ETFs accessible to their clients.”
Using data from crypto platform BitMEX, Colonnese and Scales estimated the 10 bitcoin ETFs averaged $302 million in net daily inflows for the month of February. Last week alone, those spot ETFs booked record inflows of $1.7 billion — bringing total net inflows to $7.5 billion since their Jan. 11 launch.
HALVING ON THE HORIZON
Increased demand is also aligning with bitcoin’s next halving event, which is expected in April.
Bitcoin halving, which occurs every four years, is when the reward for bitcoin mining is cut in half. That reduces how fast new coins are created.
While analysts say constrained supply in a time of high demand can push prices higher over time, others point to significant volatility that resulted before and after halving events — and the possibility of declines.
“History may not be a reliable guide to predict how ... halving of bitcoin will influence its value,” Rajeev Bamra, senior vice president of digital finance at Moody’s Investors Service, noted. “Various ... factors ... and regulatory developments can influence the trajectory of Bitcoin’s price.”
A HISTORY OF VOLATILITY
Bitcoin has a history of drastic swings in value — which can be sudden and happen overnight in trading that continues at all hours, every day.
Bitcoin rocketed from more than $5,000 at the start of the pandemic to its November 2021 peak of nearly $69,000, in a period marked by a surge in demand for technology products. Prices crashed during a series of Federal Reserve rate hikes intended to cool inflation and make risky investments riskier. Then came the 2022 collapse of FTX, which undermined confidence in crypto.
At the start of last year, a single bitcoin was worth less than $17,000. Investors, however, began returning as inflation started to cool. And 2023’s collapse of tech-focused banks led more investors to turn to crypto as they bailed out of positions in Silicon Valley start-ups.
Despite the recent excitement around bitcoin, experts maintain crypto is a risky bet with wildly unpredictable fluctuations in value.
“It’s essential to ... acknowledge ... the road ahead for the digital finance ecosystem ... is expected to navigate through a period marked by volatility,” Bamra noted — pointing the importance of “cautious optimism.”