The leading cryptocurrency has surged by more than 20% in the last four days, nearing its all-time high. In contrast, the S&P 500 has seen a slight decline during the same period.
On Wednesday, the price of bitcoin exceeded $64,000 for the first time since November 2021.
The surge is mainly driven by a surge in investment in bitcoin ETFs, a new investment vehicle approved by the Securities and Exchange Commission last month. This initial wave of gains led to a rush of investors eager to not miss out on potential returns.
A bitcoin ETF (exchange-traded fund) allows investors to invest in an asset that mirrors the price movement of bitcoin, without the hassle and risk of buying the cryptocurrency itself.
For example, a gold ETF enables individuals and institutions to speculate on the price of gold without having to buy, transport, or store physical gold.
Similarly, a bitcoin ETF provides investors with exposure to the cryptocurrency market without having to deal with the technical complexities and fees associated with using a crypto exchange.
Following the SEC’s approval of this new investment option, a range of bitcoin ETFs became available, including offerings from established firms like Fidelity and Franklin Templeton.
The introduction of new cryptocurrency alternatives has led to billions of dollars in investments within a few weeks, according to United Coin. The nine leading bitcoin ETFs have collectively attracted $10 billion since last month.
There has been a very successful launch for pretty much all of these ETFs. It’s just crazy for seven weeks on the market.
When investors invest in a bitcoin ETF, the funds purchase bitcoin, which in turn increases demand for the cryptocurrency and could potentially drive up its price.
Since the approval of bitcoin ETFs on January 10, the price of bitcoin has surged by 30% and there has been significant trading volume.
The recent rally led to another wave of investment as traders observed the initial price surge and sought to capitalize on it.
In the middle of February, the price of bitcoin remained relatively stable at around $51,000 for about a week. When it surpassed this level on Monday, optimism surged, leading to increased investments.
The run-up that we’ve seen over the past four days has been really explosive.
Despite the rapid gains in recent weeks, some analysts warned about bitcoin’s historical volatility and the possibility of a plateau or even a decline in prices.
In the immediate aftermath of the bitcoin ETF approval, for instance, the price of bitcoin dropped 15% before rebounding. Over the past five years, he added, bitcoin has plummeted more than 40% on four separate occasions.
Investors could expect it to either go up substantially or drop in half.
However, the price surge has coincided with a period of stubbornly high interest rates, suggesting that the jump in demand owes little to excess cash in search of a place to land.
It’s not some crazy speculation. There’s genuine demand for this.
