Bitcoin surpassed $50,000 on Monday for the first time since December 2021, according to CoinGecko data, suggesting confidence in the digital currency is growing after two turbulent years of scandals and bankruptcies.
Thanks to inflows in exchange-traded funds, speculation about future monetary easing and the upcoming halving, “the tailwinds for digital assets are the strongest they have been in some time,” Christopher said Newhouse, DeFi analyst at Cumberland Labs. Fortune.
BTC plunged 64% in 2022, hitting a low of $16,000, partly due to the FTX implosion. But over the past 12 months, it has increased by around 129%, although the price remains below the all-time high of nearly $69,000 reached in November 2021.
When the Securities and Exchange Commission approved 10 spot Bitcoin ETFs on January 11, retail and institutional investors gained exposure to BTC without needing to hold the underlying asset. The merger of traditional finance with digital assets, with the launch of funds by companies like BlackRock and Fidelity, has been hailed as a watershed moment for crypto.
But despite anticipation that new retail and institutional investors would fuel a bull market, BTC initially appeared volatile.
The disappointing impact of the SEC approval on BTC prices was largely caused by outflows of more than $6 billion from the decade-old Grayscale Bitcoin Trust, which operated as a closed-end trust, blocking previously investors who are now free to liquidate, according to Bloomberg. The GBTC exodus helped push prices down to $39,505, with BTC falling about 15% from the approval date.
But it is now clear that releases are slowing and prices are catching up. During the first few weeks of trading, daily outflows averaged $500 million, but they have been steadily declining since January 26. As of Friday, outflows totaled just $51.8 million, according to Bloomberg data, the lowest since the approvals.
Meanwhile, inflows to the other nine ETFs have accelerated: Last week, the cumulative net inflow was around $1.2 billion, almost half of the total so far.
“This strong buying pressure is pushing prices up, and that’s the main driver of recent growth,” said Matteo Greco, a research analyst at investment firm Fineqia International. Fortune.
If ETF flows continue at this pace, gaining about $1 billion a week, “Bitcoin will go up every day,” said Geoff Kendrick, head of digital assets research at Standard Chartered.
On top of that, the Federal Reserve indicated that interest rates would be cut in the spring, which “provides another tailwind for Bitcoin prices,” said Markus Thielen of 10x Research. Fortune. In times of high interest rates, riskier assets like Bitcoin, which are highly liquid and more volatile, tend to be less attractive.
Meanwhile, VettaFi’s recent financial futurist Dave Nadig attributes the growth to an optimism inherent to the approach of April’s halving, where miners’ financial rewards receive half, thereby reducing supply, so that small miners are forced out of the market.
“The halving gives a reason for everyone to pay attention to Bitcoin,” he said. Fortune. “There is a mechanical reason why we should expect this number to increase, and that is that supply is declining. »
Indeed, a bull market followed each of the previous four halving events. When the premiere took place in November 2012, the price of BTC was around $12. A year later, it exceeded $1,000. BTC was at $8,755 at the time of the last halving in May 2020 before its wild ride to $69,000 the following year.
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