Bitcoin hit a record high of $69,202 on Tuesday
Bitcoin, the pioneer of cryptocurrencies, has soared to a new all-time high, surpassing its previous peak in November 2021.
The digital currency hit a record high of $69,202 on Tuesday, beating a record of $68,991 struck in 2021.
This resurgence, boosting Bitcoin's market value to approximately $1.3 trillion, can be attributed to several key factors.
What's Behind Bitcoin's Price Surge
The recent surge in Bitcoin's price can be attributed significantly to the approval of exchange-traded funds (ETFs) by the US financial regulator in January.
These ETFs, which function as baskets of assets traded on the stock exchange, track the price of Bitcoin.
According to Jeff Billingham from research firm Chainalysis, this marks a sign of "institutional maturity" in the cryptocurrency market, a development not seen in previous bull runs, the British daily newspaper The Guardian, reported.
Even though some had concerns about the stability of the cryptocurrency market due to issues like the FTX exchange collapse and legal problems with important figures, the approval of Bitcoin ETFs suggests that people are starting to trust the market more and that its infrastructure is improving.
According to James Knightley, the chief international economist at ING, the recent high inflation levels in the US have motivated people to buy Bitcoin as a safeguard against increasing prices. “Risk appetite has also soared in recent weeks with tech stocks fuelling the sense of FOMO [fear of missing out] in markets and I think bitcoin is being swept along in all of this,” The Guardian quoted him as saying.
However, Gary Gensler, who is the head of the Securities and Exchange Commission (SEC), still has reservations about the cryptocurrency market, even though he reluctantly gave approval for Bitcoin ETFs due to a court ruling. He said in a statement, “Bitcoin is primarily a speculative, volatile asset that's also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing.”
Neil Wilson, Chief Analyst at brokerage firm Finalto, provides insight into the Bitcoin market's momentum, stating, “It will run out of steam. But that doesn't mean it can't go higher, just that some kind of consolidation or correction seems likely in the interim,” as per The Guardian. Wilson attributes this potential shift to "standard" factors, including investors capitalising on their profits and a diminishing supply of new buyers.
Bitcoin, a digital currency created in 2008, operates on a decentralised network without the need for banks or governments.
Transactions are recorded on a transparent and secure public ledger called the blockchain, using cryptographic technology for privacy and security. With a capped supply of 21 million coins, Bitcoin aims to prevent inflation, and new coins are created through a process called mining. It offers users a degree of financial anonymity through pseudonymous transactions.