Bitcoin Breaks New Record as US Finance Giants Boost Demand

The world’s largest cryptocurrency, Bitcoin, has reached a new all-time high of more than $69,000, surpassing the previous record set in November 2021. The new surge in price has been driven by US finance giants pouring billions into buying bitcoins.

US Spot ETFs Fuel Bitcoin Rally

One of the main factors behind Bitcoin’s recent rise is the approval of several spot Bitcoin Exchange-Traded Funds (ETFs) by US regulators in January 2024. ETFs are investment products that track the price of an underlying asset, such as Bitcoin, and allow investors to buy and sell shares of the fund on a stock exchange.

Spot ETFs are different from futures ETFs, which track the price of Bitcoin contracts that expire in the future. Spot ETFs are considered more attractive by some investors because they hold actual bitcoins, rather than derivatives, and have lower fees and risks.

The approval of spot ETFs in the US has opened the door for giant investment firms like Blackrock, Fidelity and Grayscale to sell products based on the price of Bitcoin. Between them, they have been buying hundreds of thousands of bitcoins, rapidly driving up their value.

Carol Alexander, professor of finance at Sussex University, told the BBC that these entrants “are attracting institutional investors into Bitcoin and they are putting a considerable upwards pressure on price.”

Bitcoin Halving May Boost Price Further

Another factor that may influence Bitcoin’s value is the upcoming “halving” event, expected to take place in April. Halving is a process that reduces the amount of new bitcoins created and distributed to miners, who secure the network and process transactions. Halving occurs every four years, or after every 210,000 blocks are mined, and is designed to limit the supply of bitcoins and increase their scarcity.

In the past, halving events have been accompanied by price surges, as investors anticipate a lower inflation rate and higher demand for bitcoins. The last halving, which took place in May 2020, reduced the reward for each block from 12.5 to 6.25 bitcoins. The next halving will reduce it further to 3.125 bitcoins.

Prof Alexander said that halving may also boost Bitcoin’s price, but warned that crypto was “notoriously volatile.” “Too often in the past the price crash was timed so that ordinary investors buying Bitcoin during the bubble are the ones who lose out,” she told the BBC.

Bitcoin’s Turbulent History

The new record represents another dramatic moment in Bitcoin’s turbulent history. It was invented in 2009 by a person or persons calling themselves Satoshi Nakamoto – their true identity remains a mystery. Conceived as a means to create money for the internet, its roots lay in an anti-establishment ethos encouraging people to live free from the existing power structure of financial institutions and governments.

However, its new all-time high value has come about precisely because those establishment firms have been pouring billions of dollars into acquiring it. This has raised questions about whether Bitcoin is losing its original vision and becoming more mainstream and regulated.

Bitcoin’s value has also been subject to wild fluctuations over the years, influenced by various factors such as supply and demand, regulatory developments, security breaches, technical issues, and market sentiment. Some of the notable events that have affected Bitcoin’s price are:

• In 2010, Bitcoin was traded for the first time, at a price of $0.0008 per coin.
• In 2013, Bitcoin reached $1,000 for the first time, but then crashed to $300 after the collapse of Mt. Gox, the largest Bitcoin exchange at the time.
• In 2017, Bitcoin soared to nearly $20,000, driven by a wave of retail and institutional interest, but then plunged to $3,000 in 2018, amid regulatory crackdowns and hacking incidents.
• In 2020, Bitcoin recovered to $10,000, supported by the halving event and the Covid-19 pandemic, which increased the demand for digital and alternative assets.
• In 2021, Bitcoin reached $68,999.99, its previous all-time high, boosted by the launch of the first Bitcoin futures ETF in the US and the adoption of Bitcoin as legal tender in El Salvador.
• In 2022, Bitcoin plummeted to $16,500, dragged down by the bankruptcy of FTX, the huge cryptocurrency exchange founded by so-called “king of crypto” Sam Bankman-Fried, and the global economic slowdown.
• In 2023, Bitcoin climbed back to $40,000, helped by the recovery of the crypto market and the growing interest from institutional and corporate investors.
• In 2024, Bitcoin broke a new record of $69,202, fueled by the approval of spot ETFs in the US and the anticipation of the halving event.

For many holders of Bitcoin, this will be a moment to celebrate – as their own wealth will have risen a great deal. But history suggests they should be prepared for that to change.