Photo by Karolina Grabowska
Bitcoin, the world’s largest digital asset with a market cap of well over $1 trillion, has once again made headlines as it surged to a new all-time high, surpassing the $69,000 mark on March 1, the popular crypto exchange Coinbase. This milestone comes amidst a flurry of activity in the cryptocurrency market, driven by several key factors.
Here are three things to know:
A significant catalyst behind Bitcoin’s historic run higher is the massive wave of buying by the new U.S.-based spot Bitcoin exchange-traded funds (ETFs).
“A spot Bitcoin ETF is an exchange-traded fund — a highly liquid fund that changes price throughout the trading day, just like a stock — that directly tracks the price of Bitcoin, primarily by holding a large amount of the cryptocurrency itself. It’s similar to a spot gold ETF, which holds physical gold bullion on behalf of its shareholders,” reported NerdWallet.
These ETFs, which opened for business on Jan. 11, have attracted substantial investor interest and have contributed to driving Bitcoin’s price upward. Despite experiencing a brief dip following their launch, Bitcoin quickly rallied above $50,000 by mid-February and continued its upward trajectory towards the end of the month.
“I do think the fact this is happening concurrent with the ETFs – and you can look at the inflows of those things – that seems to be a pretty big driver for this [rally],” Colin Harper, head of research at the bitcoin mining software firm Luxor, told The New York Post.
Bitcoin is believed to have entered its third bull run in mid-2023. This bull run is attributed to the market’s growing acceptance of Bitcoin as an institutional-grade asset class, particularly through the introduction of Bitcoin ETFs.
Additionally, favorable macroeconomic factors, such as the slowdown and end of Fed rate hikes, have also contributed to Bitcoin’s upward momentum.
Bitcoin’s recent surge is contextualized within the broader historical and market dynamics of the cryptocurrency space. The previous bull run, driven by covid-era monetary policy and regulatory changes allowing institutions to embrace Bitcoin, led to Bitcoin’s all-time high of $69,045 in 2021. However, subsequent record-setting inflation and Fed rate hikes in 2022 dampened crypto prices temporarily. Nevertheless, Bitcoin’s resilience and the ongoing evolution of the cryptocurrency market continue to fuel investor interest and drive prices higher.
“The strong performance of risk assets overall, like crypto, equities, credit, tell us that financing conditions have probably loosened, especially since November last year and the peak in rates,” Aurelie Barthere, an analyst with Nansen, told Coin Desk. “Investors are also really sanguine about macro prospects (recession no longer consensus), and the risk premium linked to uncertainty about a potential growth shock has come down.”
Photo by Karolina Grabowska: https://www.pexels.com/photo/a-gold-coin-on-a-smartphone-screen-5980866/
