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Bitcoin traded as high as $69,200 on Tuesday, briefly setting a new all-time record for the world’s largest cryptocurrency before falling back.
The price has surged since US regulators in January approved spot bitcoin exchange traded funds issued by Wall Street stalwarts including Fidelity and BlackRock, the world’s largest asset manager.
The new wave of capital has resulted in gains of more than 60 per cent since the start of the year and has helped push the flagship crypto token into uncharted territory, passing the record set in November 2021. Within hours of touching the milestone, however, bitcoin had fallen more than 8 per cent to about $62,000.
More than $7.5bn worth of capital has flowed into the newly approved bitcoin ETFs since their first day of trading on January 11, according to crypto investment group CoinShares.
“The excitement and hype around the ETFs has ended up being far beyond anyone’s expectations,” said Jad Comair, founder of digital asset investor Melanion Capital. Spot bitcoin ETFs give investors the ability to gain direct exposure to the cryptocurrency without the risks associated with largely unregulated crypto exchanges.
Bitcoin’s latest record marks a watershed for the cryptocurrency, which traded as low as $16,000 amid a severe market crisis in 2022 and was frequently dismissed by sceptics as a burst bubble that would not recover following the collapse of high-profile crypto companies including FTX.
Comair said: “It’s not just a spectacular jump in price, it’s also a paradigm shift for bitcoin. Today, investors that allocate for bitcoin will be five or 10 times more confident than they would have been just a couple of years ago.”
Luca Paolini, chief strategist at Pictet Asset Management, said: “We have to ask the question of whether we’re missing something big or not. The environment we’re in now is very different from a couple of years ago when we were clearly in bubble territory.”
The token’s price is also being driven by a fast-approaching upgrade to the bitcoin network — referred to as the bitcoin halving — scheduled for next month, which will slow the circulation of available coins. Bitcoin bulls expect that to continue to fuel the cryptocurrency’s upward momentum.
The run, which has set a dramatic pace even by bitcoin’s standards, has sparked comparisons with 2021, when bitcoin set its previous records following a wave of retail excitement.
JPMorgan analyst Nikolaos Panigirtzoglou said: “The current backdrop looks similar to the exuberant backdrop of 2021 when retail investors were driving both a crypto and equity market rally simultaneously on momentum.”
Panigirtzoglou cautioned there was a “high risk of profit-taking” ahead of next month’s bitcoin halving event.
But despite bitcoin’s latest surge, liquidity is yet to return for the crypto industry’s most well-known token. According to numbers shared by data provider CCData, liquidity on the top 21 centralised exchanges still lags well behind levels registered this time last year.
