The world's largest cryptocurrency, Bitcoin, has risen 22% this year to $52,005, surpassing the $1 trillion milestone for the first time since its peak high in late 2021.
Its revival has electrified the broader cryptocurrency market, which now exceeds US$2 trillion, according to CoinGecko.
The market has been strengthened by the US regulatory approval of various spot Bitcoin exchange-traded funds (ETFs) from BlackRock and Fidelity, among others, which provide access to the cryptocurrency on traditional stock exchanges.
The US spot ETFs added 60,000 Bitcoin in their first month of operation, more than doubling miner production during the same period, according to brokerage Bernstein.
“The amount of flows far outstrips anyone’s expectation,” said Mark Connors, head of research at Canada’s 3iQ.
Crypto trade volumes are also high.
Total spot trading volumes on centralised exchanges increased by 4.4% to US$1.4 trillion in January, the fourth consecutive monthly gain and the highest level since June 2022, according to a report by London-based researcher CCData.
The return of interest helped Coinbase Global, the largest publicly traded cryptocurrency exchange, earn its first quarterly profit in two years last week.
“The Bitcoin appreciation is contributing to better spot Bitcoin ETF flows, which is in turn driving Bitcoin prices higher, and pulling other tokens higher as well,” JPMorgan analysts said.
Many industry experts believe the prognosis is bright at the moment, with investors buying Bitcoin ahead of the blockchain's "halving"—a preplanned procedure that decreases mining payouts by half every four years—which is scheduled for April.
Gautam Chhugani, a Bernstein analyst, predicts that 2024 will be a breakout year for cryptocurrencies, with Bitcoin reaching all-time highs, followed by a peak of US$150,000 by mid-2025.
“This optimistic outlook is bolstered by the expectation of an upcoming halving event and the possibility of interest-rate reductions,” CCData analysts said.
While Bitcoin is still 32% away from its record high of US$69,000, it reached an all-time high against the Japanese yen last week at 7,919,000 yen.
It's not just crypto high-fives. There is some evidence that the market is being driven by FOMO.
CoinGlass' Crypto Fear & Greed Index, which ranges from 0 to 100 with zero indicating "extreme fear" and 100 indicating "extreme greed," remained at 72. Typically, when investors become overly greedy, the market is headed for a correction.
Riskier assets, such as Bitcoin, may be threatened by persistently high-interest rates; traders have pushed back expectations on a rate decrease to June from March, following a streak of solid US economic data.
“While we remain bullish with liquidity rushing back into risk assets, inflation being sticky over 3 per cent remains a downside risk and would also mean increased volatility across markets,” analysts at crypto trading firm QCP Markets said. REUTERS
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