The world’s largest crypto currency has increased by 22% this year to $52,005, exceeding the $1 trillion mark for the first time since its high in late 2021.
The world’s largest crypto currency has risen 22% this year to $52,005, surpassing the $1 trillion milestone for the first time since its peak in late 2021.
Its revival has electrified the broader cryptocurrency market, which now exceeds $2 trillion, according to CoinGecko data.
The sector has been reinforced by the U.S. regulatory approval of numerous spot bitcoin exchange-traded funds (ETFs), including those from BlackRock and Fidelity, which provide access to the cryptocurrency on traditional stock exchanges.
The U.S. spot ETFs added 60,000 bitcoins in their first month of operation, more than doubling miner production during the same period, according to brokerage Bernstein.
“The amount of flow far outstrips anyone’s expectations,” said Mark Connors, head of research at Canada’s 3iQ Corp.
Crypto trade volumes are also high.
Total spot trading volumes on centralized exchanges increased by 4.4% to $1.4 trillion in January, the fourth consecutive monthly gain and the highest level since June 2022, according to a report by London-based researcher CCData.
The renewed enthusiasm helped the largest publicly traded cryptocurrency exchange, Coinbase Global (COIN.O), achieve its first quarterly profit in two years last week.
“The bitcoin appreciation is contributing to better spot bitcoin ETF flows, which is in turn driving bitcoin prices higher and pulling other tokens higher as well,” analysts at J.P. Morgan said.
Many industry observers believe the future is favorable at the present, with investors purchasing bitcoin ahead of the blockchain’s “halving”—a preplanned procedure that decreases mining payouts by half every four years—scheduled for April.
Gautam Chhugani, a Bernstein analyst, predicts that 2024 will be a breakout year for cryptocurrencies, with bitcoin reaching all-time highs before peaking at $150,000 by mid-2025.
“This optimistic outlook is bolstered by the expectation of an upcoming halving event and the possibility of interest-rate reductions,” the analysts said.
While bitcoin is still 32% off its record high of $69,000, it reached an all-time high against the Japanese yen last week at 7,919,000 yen.
It’s not just crypto high-fives. There is some evidence that the market is being driven by FOMO.
CoinGlass’ Crypto Fear & Greed Index, which ranges from 0 to 100 with zero indicating “extreme fear” and 100 indicating “extreme greed,” remained at 72. Typically, when investors become overly greedy, the market is headed for a correction.
Riskier assets, such as bitcoin, may be challenged by persistently high interest rates; traders have moved back expectations on a rate decrease to June from March, following a spate of good U.S. economic data releases.
“While we remain bullish with liquidity rushing back into risk assets, inflation being sticky over 3% remains a downside risk and would also mean increased volatility across markets,” analysts at QCP, a crypto-trading company, said.
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