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Bitcoin Hits All-Time High. Here’s What’s Driving Its Price Up.
The price of bitcoin has hit a record high, continuing its rapid recovery that began in late 2023.
The digital token surged to $68,818 early Tuesday morning, well above its $44,000 valuation at the start of the year. Bitcoin’s rapid rise has also helped push up the price of ether, Solana, and other popular cryptocurrencies this week.
What’s fueling the rally? Cryptocurrency watchers say bitcoin is skyrocketing in part because demand is increasing on so-called spot bitcoin exchange-traded funds. ETFs, which allow investors to invest in the cryptocurrency sector with less risk than ever before, have attracted a huge influx of money this year, experts said.
“Investors are waking up to the fact that bitcoin can be treated as a non-correlated asset, which makes it extremely attractive for portfolio diversification,” Joel Kruger, market strategist at digital currency exchange LMAX Group, told CBS MoneyWatch.
A spot bitcoin ETF allows investors to gain direct exposure to bitcoin without actually holding it. Unlike regular bitcoin ETFs, where bitcoin futures contracts are the underlying asset, bitcoin is the underlying asset of a spot bitcoin ETF. Each spot bitcoin ETF is managed by a company that issues shares of its bitcoin holdings that are purchased through other holders or through a licensed cryptocurrency exchangeThe shares are listed on a traditional stock exchange.
Federal regulators approve nearly a dozen Bitcoin ETFs in a win for the cryptocurrency industry 02:58
The United States Securities and Exchange Commission approved the sale of spot bitcoin ETFs in January. Since then, investors have deposited about $7.35 billion into the 11 different funds available, reported Bloomberg. Some of the world’s largest institutional investors, including BlackRock and Fidelity Investments, are now offering spot bitcoin ETFs.
Bitcoin’s price rally began months earlier in 2023: Its price reached a 19-month high in December at around $41,000. Analysts at the time attributed the surge to three main factors, including the anticipation of SEC approval of spot ETFs, the anticipation of Fed rate cuts in 2024, and the impending halving event where the reward for mining bitcoins is halved.
Of course, bitcoin’s current price surge doesn’t make the cryptocurrency any less volatile, Insider investment correspondent Laila Maidan told CBS News in December, when the cryptocurrency topped $41,000, its highest level in 19 months at the time.
“It doesn’t mean cryptocurrency is going to skyrocket and stay high,” Maidan said. “It’s still volatile and there are a lot of people who will continue to trade it.”
Still, bitcoin’s resurgence is good news for cryptocurrency investors, many of whom have seen their assets plummet in value in 2022 following the collapse of FTX and other cryptocurrency exchanges. As the world’s largest cryptocurrency, both in terms of trading volume and the most mined, bitcoin is often viewed by financial analysts as an indicator of the overall health of the cryptocurrency industry.
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