in my heart The rally driving Bitcoin towards record highs is a simple principle of economics: supply and demand.
Demand for the token from U.S. exchange-traded funds (ETFs) is outpacing the amount of Bitcoin that long-term holders are willing to sell. This has ignited the crypto market, attracting momentum-hungry traders and prompting speculators to close out bearish bets as leveraged bets for further gains increase.
In a wild 24 hours for the crypto market, Bitcoin rose as much as 13% on Wednesday to US$63,968, surpassing $60,000 for the first time since November 2021. It then traded at $61,300 in Singapore as of 10:30 a.m. Thursday, paring some of the gains. Along the way, Coinbase, a major digital asset exchange in the United States, suffered an outage due to a spike in traffic and eventually restored service.
Bitcoin has already surged more than 40% this year, on top of the successful debut of a US ETF that directly owns the token. A series of funds from BlackRock, Fidelity Investments and others began operations on January 11 and have attracted about $7 billion in net inflows to date. At current levels, the token is eyeing a pandemic-era record of $68,991.85, making it a bullish outpost as hopes for monetary easing fade and caution prevails in global markets.
The reduction in bvitcoin's upcoming supply growth, the so-called halving, further adds to the upbeat mood, even as debate continues over how much of an impact this event will actually have on the price outlook.
“The optimism surrounding Bitcoin is being driven by several factors working together: spot BTC ETF inflows in the US, an upcoming reduction in Bitcoin new issuance known as the halving; “It's an overall new sense of optimism for the crypto asset class as a whole.” Jonathon Miller, MD of Kraken Australia Digital Asset Exchange.
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Bitcoin's value has more than tripled since the beginning of last year, rebounding from a 64% plunge in 2022. This is a remarkable comeback from a series of scandals and bankruptcies that had called into question the viability of cryptocurrencies.
“It’s pretty crazy,” said Ryan Kim, head of derivatives at digital asset prime brokerage firm FalconX.
Bitcoin is set to outperform traditional assets like stocks and gold in 2024, providing a platform for volatility for opportunistic traders.
Inflows into Bitcoin ETFs have industry observers warning of tight supply. Roughly 80% of Bitcoin's supply has been idle for the past six months. The nine new spot ETFs contain over 300,000 Bitcoins, which is 7x the amount of new coins mined since January 11th.
Read: Bitcoin Spot ETF could be heading to South Africa in 2024
After the halving, expected in late April, the number of new coins mined each day will drop from the current 900 to 450. Proponents predict that if demand remains constant, prices have room to rise.
“We are starting to see a pretty clear fomo-type rally,” said Zaheer Ebtikar, founder of crypto fund Split Capital. “More and more people are convinced and are buying it.”
The speed of its progress has some observers warning of the boom-and-bust cycles that cryptocurrencies have become emblematic of. For example, Bitcoin has fallen below $15,500 about a year after hitting an all-time high in November 2021.
Jaime Baeza, founder of CryptoHedge, said: “This move is very sudden and leverage is very high at the moment, as derivative standards and funding rates suggest, leading to a sharp correction of more than 20%. I wouldn't be surprised.” Fund AnB Investment. “Still, I have no intention of shorting this rally as long as it continues to rise at this pace.” David Pan and Sidhartha Shukla, Muyao Shen, Yueqi Yang, Svashree Ghosh, (c) 2024 Bloomberg LP
