Bitcoin hits record highs and completes stunning comeback
Bitcoin hit an all-time high of around $68,800 on Tuesday, marking a remarkable comeback for the volatile cryptocurrency after its value plummeted in 2022 amid a market collapse.
Bitcoin’s price has risen more than 300 percent since November 2022, a rebound that few predicted when the price fell below $20,000 in 2022. The previous record was just under $68,790 in November 2021, when crypto markets were booming and amateur investors poured their savings into experimental digital coins. .
‘This is just the beginning of this bull market’ said Nathan McCauley, the CEO of the crypto company Anchorage Digital. “The best has yet to come.”
Bitcoin’s recent rise has been driven by investor enthusiasm for a new financial product related to the digital currency. In January, US regulators allowed a group of crypto firms and traditional financial firms to offer exchange-traded funds (ETFs) that track the price of Bitcoin. The funds offer people an easy way to invest in the crypto markets without directly owning the virtual currency.
According to Bloomberg Intelligence, investors had poured more than $7 billion into the investment products last week, fueling Bitcoin’s meteoric rise.
The price of Ether, the second most valuable digital currency after Bitcoin, has also risen this year. Its rise is partly due to excitement over the prospect that regulators could also approve an ETF tied to Ether.
Despite the euphoria, the crypto industry is still dealing with the aftermath of the 2022 crash. Sam Bankman-Fried, the disgraced founder of the collapsed crypto exchange FTX, will be sentenced to prison at the end of March. The Securities and Exchange Commission has sued several prominent crypto companies, including US exchange Coinbase, alleging that the companies offer unregistered securities.
Courts have begun to consider some of these lawsuits, and the outcome could determine whether crypto companies can continue to operate in the United States. Many skeptics remain unconvinced that digital currencies offer much real-world utility.
“There is no inherent value,” said John Reed Stark, a former SEC official and outspoken critic of the crypto industry. “There is no proven track record of adoption or dependency.”
Bitcoin was invented in the aftermath of the 2008 financial crisis by a mysterious developer under the pseudonym Satoshi Nakamoto. The digital currency was originally seen as a decentralized alternative to the traditional financial system, a way for people to exchange money without having to rely on banks or other intermediaries.
But as Bitcoin’s value increased, it became a vehicle for financial speculation. The price of the coin rose quickly before falling just as quickly, creating new millionaires one day and wiping out their savings the next.
Early in the pandemic, an increase in day trading by amateur investors helped make cryptocurrencies a hot commodity. The industry promoted itself in splashy magazine spreads and Super Bowl commercials, sending Bitcoin’s price to a record high.
Within a year the bubble burst. A series of corporate implosions culminated in November 2022 with the collapse of FTX, Mr Bankman-Fried’s exchange. Investors lost billions of dollars when the price of Bitcoin plummeted to around $16,000.
The industry’s fortunes began to improve in August, when a federal appeals court cleared the way for companies to offer ETFs tied to Bitcoin. An ETF is essentially a basket of assets broken down into stocks. Investors buy shares in the basket, rather than owning the assets directly.
In the crypto world, this means investors can gain exposure to Bitcoin without mastering the technicalities of a digital currency wallet, or entrusting large amounts of money to overnight companies with checkered legal histories. Financial giants like BlackRock and Fidelity offer Bitcoin investment products, providing a measure of stability to a volatile industry.
For years, cryptocurrency advocates predicted that the adoption of Bitcoin ETFs would bring billions of dollars of new investment into the sector, although some analysts were skeptical of these predictions.
Initial data show that the impact has been significant. In recent months, the adoption of investment vehicles, combined with other factors, has caused Bitcoin’s price to rise.
Later this year, the amount of new Bitcoin entering circulation will decrease due to an event known as “the halving.” The event, which was programmed into Bitcoin’s underlying code, will cut in half the amount of Bitcoin people receive when they use software to validate crypto transactions (a process commonly known as ‘mining’).
The prospect of scarcer Bitcoin supply has helped push its price higher, some analysts have argued.