Bitcoin has finally broken through its 2021 record high after surging past $69,000 on Tuesday, fuelled by strong demand for US listed exchange-traded funds and a fear of missing out (Fomo) on the digital coin's halving in April.
The world's biggest cryptocurrency hit $69,202, eclipsing its record high of $68,991.85 set in November 2021.
The price record was short-lived, however, and the digital token has pared back those gains to settle at $66.978.12 as of 7.30pm UAE time.
“The coin’s price is rising exponentially … and the strength of the rally makes us think that there is rising Fomo aiming the $100,000 mark,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said in a research note this week.
So far this year, the digital token has jumped 57.77 per cent to reach a market capitalisation of $1.31 trillion, as inflows into spot Bitcoin ETFs accelerated. The total market cap of the cryptocurrency sector is up 5.7 per cent at $2.64 trillion.
Bitcoin's record high in 2021 occurred shortly before inflation and interest rates took off during the Covid-19 pandemic.
In November 2022, the cryptocurrency plummeted below $16,000 as the sector entered a “crypto winter”, resulting in the collapse of platforms including Celsius, Three Arrows Capital and Sam Bankman-Fried's FTX.
The collapse of FTX, once valued at $32 billion, is the highest-profile cryptocurrency exchange failure to date, after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.
However, in January, the US Securities and Exchange Commission approved the country's first spot Bitcoin ETFS, clearing the way for them to be traded on the New York Stock Exchange, Cboe Global Markets and the Nasdaq.
The approval marked a key moment for the cryptocurrency sector, ushering in a regulated path for institutional and retail investor participation in the cryptocurrency asset class - and signalling the end of the sector's “Wild West” era.
The SEC approved 11 spot Bitcoin ETFs offered by major asset management companies including BlackRock, VanEck, Fidelity, Franklin Templeton and Cathie Wood’s ARC.
Bitcoin ETFs are similar to traditional ETFs – a low-fee basket of securities consisting of stocks, bonds, commodities or other financial assets that track global markets – but the digital token is the underlying asset.
“From a fundamental perspective, the price surge makes sense. Supply is limited, demand is surging, hodlers [hold on for dear lifers] aren’t willing to sell and the arrival of Bitcoin ETFs made the asset class more investable for big players,” Ms Ozkardeskaya said.
“Spot Bitcoin ETFs have amassed $6 billion since their inception, and BlackRock’s ETF saw a whopping $520 million inflows in a single day. It was apparently the second-biggest inflow into a US ETF, all asset classes included.”
The expected Bitcoin halving in April, when the amount paid to miners is slashed in a preprogrammed move every four years to reduce supply and maintain its scarcity value, is adding to the current rally that has extended to other cryptocurrencies, including Ethereum, Solana and meme coins such as Shiba Inu.
Ether, the second-biggest cryptocurrency by market cap, is currently trading at $3,797.51, its highest price since January 2022, Solana is up 6.12 per cent at $139.99 while Shiba Inu, a favourite of Elon Musk, is leading the meme coin revival after jumping 29.94 per cent to trade at 0.00003743.
“According to past cycles, there is a possibility that Bitcoin will experience further growth to reach a peak within six months to a year and a half after halving, and Ethereum may follow suit with a breakthrough,” said Ryan Lee, chief analyst at Bitget Research.
“With the entry of leading mainstream financial institutions, it can be anticipated that collective market forces will drive Ethereum to achieve a historical high in 2024, surpassing $4,900.”
During an interview with The National in June last year, Cameron and Tyler Winklevoss, the billionaire founders of cryptocurrency exchange Gemini, forecast that Bitcoin could reach as high as $500,000.
“Our bull case for Bitcoin is that it will disrupt gold,” Tyler Winklevoss said at the time.
“If you do the maths on 21 million in the supply of Bitcoin, the market cap of gold, let us say it is $10 trillion, maybe it is $11 [trillion], somewhere in that ballpark, that puts one Bitcoin – if it disrupts gold, and gets that market cap – at $500,000.”
