Why crypto is surging back to all-time highs and shrugging off high interest rates

  • Bitcoin is returning to its all-time high of $69,000.
  • The last time the cryptocurrency reached current levels, interest rates were close to zero.
  • Now, an imbalance between supply and demand is overshadowing the prospects for higher interest rates for longer.

Bitcoin is on a prolonged rebound to levels last seen when interest rates were near zero and Pixelated works of art regularly sold in the millions..

On Monday, bitcoin soared more than 5% to surpass $66,000 for the first time in almost three years. It is within reach of its all-time high of $69,000. Ether, solana, dogecoin and other tokens are also organizing rallies. In February, the value of the cryptocurrency market. went back to 2 billion dollars for the first time since April 2022.

This new test of highs faces headwinds that interest rates may remain high for longer. Markets have pushed back their forecasts for rate cuts as inflation persists and the economy shows little sign of weakening.

Last time, the rally was driven by low interest rates that encouraged speculative behavior. When the Federal Reserve began raising rates to reduce high inflation, momentum ran out and bitcoin plummeted to $16,000 less than a year after hitting records.

Now cryptocurrencies are rising with rates still high and no clear path down.

What gives?

"Although Fed rate cut expectations have been delayed, the threat of rate hikes is off the table for now," Blue Chip Daily chief technical strategist Larry Tentarelli told Business Insider, adding: " So bitcoin "He's been recovering."

There is also an imbalance between supply and demand that seems to outweigh political concerns.

A series of bitcoin ETF approvals has boosted demand and retail interest, as markets prepare for the bitcoin halving event that will reduce the reward for miners and halve daily issued volume.

The halving occurs approximately every four years, with occurrences in 2020, 2016, and 2012. In the 12 months following the previous three halvings, bitcoin rose 8,069%, 284%, and 559%. The event puts pressure on supply as it slows the pace at which new bitcoins enter the market, and this year's halving will come at a time when demand is rising sharply.

Tentarelli and other market professionals have pointed to the emergence of bitcoin ETFs as a "tremendous" driver of cryptocurrency demand, as the products allow more investors to gain exposure without purchasing tokens directly.

Data from CoinShares released on Monday indicates that digital investment products last week saw the second-largest weekly inflows on record, at $1.84 billion. Ninety-four percent of those entries went to bitcoin products. Trading volumes for investment products reached a record high of more than $30 billion in the same period.

ETFs from Wall Street titans like BlackRock and Fidelity invest directly in bitcoin and are hoarding more and more available supply.

A CoinDesk report from February, a month after the ETF's approval, said the 11 funds held 192,000 bitcoins. That figure is separate from the 420,000 owned by Grayscale, which converted its bitcoin trust into an ETF, and the nearly 200,000 owned by MicroStrategy.

Chartered Standard has predicted that ETF inflows could help push the price of bitcoin to $200,000. Fundstrat's Tom Lee has an even more bullish prediction, saying crypto could reach $500,000.

“There is a finite supply and now we have a potentially huge increase in demand” with spot approval of bitcoin ETFs, Lee said in a recent interview, “so I think in five years around half a million would be potentially achievable.”

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