Bitcoin Skyrockets to Near-Record Highs: The ETF Effect Unveiled
Bitcoin is currently on a rapid upward trend, approaching its all-time high. On Monday, the digital currency surged by 8% to reach $67,310, significantly surpassing its valuation of $44,000 at the beginning of the year. It is now less than $2,000 away from breaking its previous record of around $69,000 in November 2021.
The driving force behind this surge is attributed to the increasing demand for spot bitcoin exchange-traded funds (ETFs). These ETFs provide a less risky way for investors to enter the crypto market, and they have attracted a substantial influx of cash throughout the year. Experts suggest that investors are drawn to bitcoin as an uncorrelated asset, making it appealing for portfolio diversification.
A spot bitcoin ETF allows investors to gain exposure to bitcoin without actually holding the digital currency. Unlike regular bitcoin ETFs, where bitcoin futures contracts serve as the underlying asset, spot bitcoin ETFs have actual bitcoins as their underlying assets. Managed by a firm, these ETFs issue shares based on their bitcoin holdings, acquired from other holders or authorized cryptocurrency exchanges. The shares are then listed on traditional stock exchanges.
In January, the U.S. Securities and Exchange Commission gave the green light for the sale of spot bitcoin ETFs. Since then, investors have deposited a significant amount, totaling $7.35 billion into the 11 different available funds. Notably, major institutional investors like BlackRock and Fidelity Investments now offer spot bitcoin ETFs.
Bitcoin’s price surge began months before in 2023, reaching a 19-month high of about $41,000 in December. Analysts credited this surge to factors such as the anticipation of SEC approval for spot ETFs, expectations of Fed rate cuts, and the upcoming halving event, where the reward for mining bitcoin is halved.
Despite the ongoing surge, it’s important to note that bitcoin remains highly volatile, as highlighted by investing correspondents. Laila Maidan emphasized in December that the cryptocurrency’s value doesn’t guarantee a sustained high, and there will always be traders contributing to its volatility.
Bitcoin’s resurgence is positive news for crypto investors, especially considering the value declines many experienced in 2022 following the collapse of FTX and other crypto exchanges. As the largest cryptocurrency by trading volume and most mined, bitcoin serves as a key indicator of the overall health of the crypto industry, according to financial analysts.
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