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Bitcoin appears to be closing in on a new all-time high after shooting up in price nearly 10 per cent over the last 24 hours.
The latest rally builds on a year of upward momentum for the cryptocurrency, which has seen its price rise from below $20,000 at the start of last year to above $62,000 on Wednesday – less than $7,000 away from the record it reached in November 2021.
Several factors have driven the recent resurgence, with some market analysts claiming that bitcoin’s gains are far from over.
“We have entered a new era for bitcoin, with its rapid climb this week marking the clear start of a new bull market,” Alex Adelman, founder of the crypto app Lolli, told The Independent. “This bitcoin bull market will be unlike any before.”
Mr Adelman points to the recently approved spot exchange-traded funds (ETFs) by the US Securities and Exchange Commission, which brought in billions of dollars worth of institutional investment to the crypto market for the first time.
This week, nine of the newly approved ETFs broke their all-time daily volume record, suggesting that it is mostly this new wave of investors boosting the market.
“In contrast to past bull markets, there is little to no speculative fervour from retail investors,” Mr Adelman said. “Instead, momentum is underpinned by a more mature and calculated approach to bitcoin with an understanding of its strength from the world’s biggest institutional players… Once bitcoin breaks its all-time high, we will see an additional wave of interest in bitcoin from retail investors.”
Bitcoin ETFs bring new protections for crypto investors, which could provide more stability to the market, according to Nigel Green, CEO of financial advisory firm deVere Group. This in turn could help the market mature, mitigating price volatility issues and enticing more investors to the space.
The limited supply of bitcoin – only 21 million will ever exist – has earnt the cryptocurrency the name “digital gold” in recent years, and encouraged a no-sell ‘HODL’ mentality among some investors. At the same time, its utility and accessibility has grown considerably in recent years.
Alongside established banks offering customers ways to buy, sell and spend bitcoin, governments have also recognised its potential as an alternative to traditional fiat currencies. In 2021, El Salvador became the first country in the world to introduce it as a national currency.
“The broader acceptance of cryptocurrencies, with major companies now accepting bitcoin as a form of payment and traditional financial platforms integrating digital assets, is attracting a more diverse range of retail investors,” Mr Green told The Independent.
“User-friendly exchanges and mobile apps have made it easier than ever for retail investors to enter the crypto market, contributing to the democratisation of cryptocurrency investing. This combination of institutional and retail interest is creating a dynamic and robust ecosystem that could propel bitcoin to new heights.”
Another factor driving positive sentiment to the market is the prospect of bitcoin’s limited supply being even further constricted by an event known as the halving. This will see rewards for mining the cryptocurrency slashed in half, with previous events resulting in record-breaking rallies in the months following.
Taking place roughly every four years, the next halving is scheduled to take place on 19 April. Bitcoin’s historical price cycles can be attributed to this quadrennial event, with some analysts making price prediction models based on bitcoin halvings.
The sudden price gains have also led to warnings about the risks involved in investing in bitcoin, which remains a relatively new asset class.
“As we look ahead to the next year, it’s vital to remember first-principles when trading crypto,” said Bivu Das, the UK managing director of the cryptocurrency exchange Kraken.
“I always encourage people to do their own research into the crypto platforms and assets in the market. Particularly for anyone new to the space, look for a platform that provides an experience that centres around simplicity, customer service, robust security, and strong liquidity.”
