Bitcoin prices near record high. Here’s why.

Bitcoin is on a vertical tear, continuing its rapid resurgence and getting close to breaking its all-time high.

On Monday, the digital token rose 8% to $67,310, well above its $44,000 valuation at the start of the year and less than $2,000 away from surpassing its November 2021 all-time high of around $69,000.

What is driving the rally? Cryptocurrency watchers say bitcoin is soaring in part because demand for so-called Spot bitcoin exchange traded funds. ETFs, which allow investors to dabble in cryptocurrencies in a less risky way than ever, have attracted a huge influx of cash this year, experts said.

"Investors are becoming interested in the fact that bitcoin can be treated as an uncorrelated asset, making it extremely attractive for portfolio diversification," Joel Kruger, market strategist at digital currency exchange LMAX, told CBS MoneyWatch. Group.

A spot bitcoin ETF allows investors to gain direct exposure to bitcoin without owning it. Unlike regular bitcoin ETFs, where bitcoin futures contracts are the underlying asset, bitcoins are the underlying asset of a spot bitcoin ETF. Each bitcoin spot ETF is managed by a company that issues shares of its own bitcoin holdings purchased through other holders or through a licensed cryptocurrency. exchange. The shares trade on a traditional stock exchange.


Federal regulators approve nearly a dozen Bitcoin ETFs in a victory for the cryptocurrency industry

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The US Securities and Exchange Commission approved the sale of spot bitcoin ETFs in January. Since then, investors have deposited some $7.35 billion into the 11 different funds available, reported Bloomberg on Monday. Some of the world's largest institutional investors, including BlackRock and Fidelity Investments, now offer spot bitcoin ETFs.

Bitcoin price rally started months earlier in 2023: its price spiked to a 19-month high in December about $41,000. Analysts at the time attributed the rise to three main factors, including anticipation of the SEC's approval of spot ETFs, anticipation of the Fed's rate cuts, and its upcoming reduce by half event, in which the reward for mining bitcoins is halved.

To be sure, bitcoin's continued price rise doesn't make the cryptocurrency any less volatile, as Insider investment correspondent Laila Maidan told CBS News in December, when the cryptocurrency surpassed $41,000, which was its highest value in 19 months at that time. .

"That doesn't mean cryptocurrencies are going to skyrocket and stay high," Maidan said. "It's still volatile and there are a lot of people who will always trade it."

Still, bitcoin's resurgence is good news for cryptocurrency investors, many of whom saw the value of their assets fall in 2022 after the collapse of FTX and other cryptocurrency exchanges. As the world's largest cryptocurrency, both in terms of trading volume and mining volume, bitcoin is often viewed by financial analysts as an indicator of the overall health of the crypto industry.

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