Bitcoin Hits Over Two-Year High as Spot ETFs Attract Strong Inflows
The Surge of Bitcoin
The price of bitcoin reached an over two-year high on Tuesday, surpassing key levels amid consistent capital flows into the recently approved spot exchange-traded funds.
Bitcoin’s Impressive Rise
Bitcoin rose 3.2% to $50,160.2 by 20:13 ET (05:13 GMT), breaking the $50,000 mark for the first time since December 2021. The token was now approximately $19,000 away from reaching new record highs.
Inflows into Spot ETFs
Gains in bitcoin came as a result of consistent capital flows into the recently-approved spot ETFs, which saw net inflows of over $1 billion in the past week, according to digital asset management firm CoinShares.
BlackRock Inc’s iShares Bitcoin Trust
BlackRock Inc’s iShares Bitcoin Trust saw the biggest inflows for the week, amounting to about $690 million.
Impact of SEC Approval
The token also benefitted from slowing outflows from Grayscale Bitcoin Trust, which gained approval from the Securities and Exchange Commission (SEC) to convert into a spot ETF. The conversion resulted in the release of about $2 billion worth of bitcoin onto the open market, causing steep losses in the price of the cryptocurrency.
Recovery from Losses
After falling as much as 20% following the approval of the spot ETFs, the token has now recouped all of those losses.
Analysts’ Projections
Analysts at Bernstein noted that an element of “fear of missing out”, or FOMO, was also attracting some retail interest in the cryptocurrency, and that the token was well-placed to hit record highs on FOMO-driven buying. Bernstein expects flows into the new ETFs to cross $10 billion in 2024.
Anticipation of Halving Event
Markets were also focused on an upcoming halving event expected in April, which historically has spurred a rally in the cryptocurrency by cutting the rate at which new bitcoins are generated by 50%.
Impact on Broader Crypto Markets
Optimism over the potential approval of a spot ETF drove gains in broader crypto markets, with the world’s second-largest cryptocurrency rising 6.3% to a one-month high of $2,672.25.
Strong Gains in U.S.-listed Crypto Stocks
U.S.-listed crypto stocks saw significant gains, with Coinbase Global Inc rising 3.8%, while bitcoin miner Marathon Digital Holdings Inc surged 14.2%. MicroStrategy Inc, the largest corporate holder of bitcoin, also rose 11%.
Challenges in Crypto Market
The broader crypto market is still struggling with decreased retail interest, especially following a series of high-profile frauds, bankruptcies, and regulatory crackdowns over the past two years.
Market Trends
This was evident with spot trading volumes in bitcoin remaining well below their 2021 and 2017 peaks. The lower trading volumes also factored into the token’s rapid gains through 2023, as bitcoin benefited from an absence of active sellers.
Regulatory Battles
The SEC and Coinbase are currently embroiled in a legal battle that could dictate the nature of crypto tokens and cause a shift in their regulatory standing.
