Bitcoin surged to a record as demand from new US exchange-traded funds and a looming reduction in the token’s supply growth fuel a breathtaking rebound in the original cryptocurrency.
The largest digital asset rose as much as 2.5% to US$69,191 on Tuesday, before paring gains. Bitcoin has climbed about 60% so far in 2024, outperforming global stocks and spreading optimism across the digital-asset market.
In an ironic twist, Bitcoin owes much of its resurgence to a regulator long-viewed as hostile to crypto: the US Securities and Exchange Commission. The SEC approved spot-Bitcoin exchange-traded funds in early January after suffering a legal defeat last year in its attempt to reject them. The move has widened the mass-market accessibility of Bitcoin, helping the crypto sector to turn the page following a bear market in 2022 and a string of subsequent bankruptcies, including the implosion of Sam Bankman-Fried’s FTX exchange.
A steady tide of money has poured into the ETFs issued by investment heavyweights including BlackRock Inc and Fidelity Investments. The net inflow of more than US$7 billion in less than two months is colliding with a looming reduction in Bitcoin’s supply growth — known as the halving — that is also stoking bullish sentiment.
“Breaking all-time highs, with the current momentum in spot ETFs as well as the upcoming halving narrative, would likely awaken true FOMO — fear of missing out — among participants currently watching markets from the sidelines,” said Stefan von Haenisch, head of trading at OSL SG Pte.
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The comeback in Bitcoin that started in early 2023 has lifted the overall market value of digital assets to about US$2.6 trillion. Its revival from a low in November 2022 caps a bust-to-boom cycle that left the industry it spawned irrevocably changed.
Bitcoin hit its previous peak of US$68,991.85 on Nov 10, 2021, according to data compiled by Bloomberg, powered by the monetary and fiscal stimulus that governments around the world deployed to tackle the impact of Covid-19. The rally was driven partly by crypto purists known for their mantra of “HODL,” the result of a misspelling of “hold” that’s been adopted as an acronym for “hold on for dear life.”
Reckoning in 2022
What was hailed by some as crypto’s ultimate coming-of-age moment back then instead turned out to be the start of a brutal reckoning.
See also: Bitcoin retreats from US$100,000 in worst spell since Trump’s win
Soon after touching its high in 2021, Bitcoin — and wider crypto markets — began a precipitous descent as central banks turned hawkish to fight runaway inflation. By the end of 2021, Bitcoin’s price had tumbled by almost a third from its peak.
The bear market exposed widespread fraud and reckless risk-taking among many of crypto’s key players, embodied by the implosion of the TerraUSD stablecoin and the collapse of Bankman-Fried’s FTX exchange and related companies. Binance, the largest digital-asset exchange, and its founder Changpeng “CZ” Zhao also came under increased regulatory scrutiny.
Bankman-Fried and Zhao are now awaiting sentencing in the US on criminal charges. TerraUSD creator Do Kwon, who was imprisoned in Montenegro last year for traveling with a fake passport, is fighting extradition to the US, where he’s wanted on fraud charges.
As the crypto dominoes fell during the 2022 slump, regulators around the world were already laying the groundwork for increased oversight — efforts given added impetus by the market crash. Dubai and Hong Kong have adopted new regulatory regimes, and the European Union passed the sweeping Markets in Crypto-Assets (MiCA) legislation last year. Countries from Australia to India and the UK have stepped up efforts to ensure that unlicensed crypto exchanges don’t cater to their residents.
BlackRock’s Impact
But just as crypto skeptics from JPMorgan Chase & Co.’s Jamie Dimon to Berkshire Hathaway Inc.’s Charlie Munger derided Bitcoin as an intrinsically worthless object of mindless speculation, one of the world’s largest financial companies was about to add fuel to its rebound.
On June 15 last year, BlackRock filed an application with the SEC for the iShares Bitcoin Trust, which would invest directly in the token. While there had already been several similar attempts, BlackRock’s size and influence — it is the biggest ETF provider — was seen as an indication that this time, the outcome might be different.
BlackRock’s ETF, trading under the IBIT ticker, was among the first batch of such products approved in early January. In less than two months, its assets have swelled to more than US$10 billion. Bitcoin, meanwhile, has more than doubled in value since BlackRock made its application.
“The Bitcoin all-time high marks a turning point for crypto,” said Nathan McCauley, CEO and co-founder of Anchorage Digital. “Traditional institutions were once sitting out; today, they are here in full force as the principal drivers of the crypto bull market.”
