Bitcoin surpassed $60,000 on Wednesday, approaching an all-time high and continuing its unabated advance since the introduction of a new type of cryptocurrency-indexed investment. At 1325 GMT, bitcoin was trading at around $60,301, close in on its all-time high of $68,991 set in November 2021 and which some analysts believe is now within reach.
Since being approved by US securities authorities on January 10, exchange-traded funds (ETFs) indexed to bitcoin have potentially allowed a larger audience to participate in the cryptocurrency without having to possess it directly. However, the funds do make investments in digital currencies.
The anticipated approval of the new investment product has contributed in recent months to a rise in its price, which has substantially fallen by the end of 2022 following the bankruptcy of several crypto giants.
The US launch of ETFs or ETPs (exchange-traded products) has “injected a fresh wave of optimism, propelling trading volumes and spotlighting crypto-linked firms”, notes Mikkel Morch of specialist fund ARK36.
In terms of accessibility, the products are akin to stocks or mutual funds for everyday investors.
Some investors anxious to recoup their bets initiated a wave of large withdrawals from the GBTC (Grayscale Bitcoin Trust) fund when it was converted into an ETF.
However, once the selling fervor calmed, flows into US bitcoin ETFs, such as BlackRock’s, rose.
According to statistics published on Monday by asset manager CoinShares, exchange-traded crypto asset-linked investment products have garnered approximately $5.7 billion since the beginning of the year.
‘Institutional endorsement’
As further evidence of “the growing institutional endorsement that’s fuelling this rally” in prices, Morch added, software business MicroStrategy said on Monday that it had purchased a further 3,000 bitcoins (then worth $155 million).
The acquisition increased its total bitcoin holdings to 193,000 (about $6.09 billion).
Bitcoin is created — or “mined” — as a reward for strong computers that solve complex challenges to validate blockchain transactions.
According to James Harte, an analyst at Tickmill, prices are also rising as significant industry players invest in Bitcoin ahead of the “halving” — or division of rewards for the token’s miners.
The event, which takes place every four years, is scheduled for April.
It is projected to reduce the rate at which new bitcoins reach the market, lowering the cryptocurrency’s potential availability for purchase, hence increasing its value.
“As the issuance of new bitcoin slows down, the existing scarcity of the digital asset becomes even more pronounced, typically leading to increased demand and, subsequently, higher prices,” noted Nigel Green, head of financial advisory firm deVere Group.
He added: “Cryptocurrencies remain highly speculative, but the enormous interest in spot ETFs and the upcoming halving event… can be expected to continue to fuel the current momentum which could lead bitcoin to surpass the $69,000 mark.”
The virtual currency has also been buoyed by optimism that the US Federal Reserve will begin to cut interest rates this year as inflation eases.