NEW YORK (AP) 鈥� has hit an all-time high less than two years after the severely damaged faith in digital currencies and sent prices plunging.
The world's largest jumped 4% this week and briefly surpassed $68,800 Tuesday, according to CoinMarketCap. That's just above bitcoin's previous record set in November 2021.
The volatile asset soon fell some, standing at just under $62,000 as of 3 p.m. ET, but the price is still up more than 175% from one year ago.
Gains in recent months have been fueled by the anticipation, and eventual , of bitcoin exchange traded funds earlier this year, which provided access to a much broader class of investors. The price for bitcoin has surged about 60% since the approval of bitcoin ETFs in January, an or a group of assets 鈥� like gold, junk bonds or bitcoins 鈥� without having to directly buy the assets themselves.
Also driving prices is what is known as bitcoin 鈥渉alving鈥� which is anticipated in April. Halvings trim the rate at which new coins are mined and created, thus lowering the supply.
Here's what you need to know.
EARLY SUCCESS OF BITCOIN SPOT ETFS
In January, the U.S. Securities and Exchange Commission from asset managers including Blackrock, Invesco and Fidelity. These newly approved ETFs hold actual bitcoin 鈥� unlike previous bitcoin-related ETFs that were invested in contracts related to future price bets, but not on the cryptocurrency itself.
While regulators have pointed to persisting risks and maintained reluctance around January鈥檚 decision, the greenlight marked a major win the crypto industry.
Institutional demand for bitcoin show "no signs of slowing down,鈥� H.C. Wainwright鈥檚 Mike Colonnese and Dylan Scales wrote Tuesday 鈥� adding that bitcoin's popularity 鈥渋s likely to accelerate in the coming months as more wealth management platforms make spot (bitcoin) ETFs accessible to their clients.鈥�
Using data from crypto platform BitMEX, Colonnese and Scales estimated that the 10 bitcoin ETFs averaged $302 million in net daily inflows for the month of February. Last week alone, these spot ETFs booked record inflows of $1.7 billion 鈥� bringing total net inflows to $7.5 billion since their Jan. 11 launch.
HALVING ON THE HORIZON
Increased demand is also aligning with bitcoin鈥檚 next halving event, which is expected at the end of April.
Bitcoin halving, which occurs every four years, is when the reward for bitcoin mining is cut in half. This reduces how fast new coins are created 鈥� making supply scarcer.
While analysts say that constrained supply in a time of high demand can push bitcoin鈥檚 price higher over time, others point to significant volatility that has resulted before and after halving events 鈥� and the possibility of sizable declines.
鈥淧ast history may not be a reliable guide to predict how the upcoming halving of bitcoin will influence its value,鈥� Rajeev Bamra, senior vice president of digital finance at Moody鈥檚 Investors Service, noted. 鈥淰arious external factors, market sentiment shifts, and regulatory developments can influence the trajectory of Bitcoin鈥檚 price.鈥�
A HISTORY OF VOLATILITY
Bitcoin has a history of drastic swings in value 鈥� which can come suddenly and happen over the weekend or overnight in trading that continues at all hours, every day.
Bitcoin rocketed from just over $5,000 at the start of the pandemic to its November 2021 peak of nearly $69,000, in a period marked by a for technology products. Prices crashed during an aggressive series of Federal Reserve rate hikes intended to cool inflation, slow money flows and make risky investments potentially riskier. Then came the 2022 , which significantly undermined confidence in crypto.
At the start of last year, a single bitcoin could be had for less than $17,000. Investors, however, began as inflation started to cool. And 2023鈥檚 collapse of actually led more investors to turn to crypto as they bailed out of positions in Silicon Valley start-ups and other risky bets.
Despite the recent excitement around bitcoin, experts still maintain that crypto is a risky bet with wildly unpredictable fluctuations in value. In short, investors can lose money as quickly as they make it.
鈥淚t鈥檚 essential to exercise caution and acknowledge that the road ahead for the digital finance ecosystem, particularly the crypto markets, is expected to navigate through a period marked by volatility,鈥� Bamra noted 鈥� pointing the importance of 鈥渃autious optimism.鈥�
Wyatte Grantham-philips, The Associated Press
