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Bitcoin hit a record high of more than $69,000 on Tuesday, marking a remarkable comeback for the volatile cryptocurrency after losing its value in 2022 amid a market downturn.
The price of Bitcoin has increased by more than 300 percent since November 2022, a resurgence that few had predicted when the price fell below $20,000 that year. Its previous record low was just under $68,790 in November 2021, as crypto markets rallied and amateur investors piled into experimental digital coins.
Corey Clipston, chief executive of Swan, a financial services firm focused on bitcoin, said the cryptocurrency was “declared dead for the 150th time”. “And Bitcoin is doing what Bitcoin does, which is win people over because they actually take the time to learn about it.”
Bitcoin’s recent surge has been driven by investor enthusiasm for a new financial product tied to the digital coin. In January, US regulators authorized a group of crypto companies and traditional finance firms to offer exchange-traded funds, or ETFs, that track the price of Bitcoin. The fund provides an easy way for people to invest in the crypto markets without directly owning the virtual currency.
As of last week, investors had plowed more than $7 billion into the investment products, according to Bloomberg Intelligence, fueling Bitcoin’s sharp rise.
The price of Ether, the second most valuable digital currency after Bitcoin, has also increased by more than 50 percent this year to nearly $3,800. Its rise has been partly driven by excitement over the possibility that regulators might also approve an ETF tied to ether.
But the cryptocurrency remains volatile. Within minutes of setting the record, the price of Bitcoin fell to almost $67,500.
And despite the excitement, the crypto industry is still considering the legal consequences of a 2022 crash. Sam Bankman-Fried, the disgraced founder of the collapsed FTX crypto exchange, will be sentenced to prison later this month. The Securities and Exchange Commission has sued several major crypto firms, including US exchange Coinbase, arguing that the companies offer unregistered securities.
Courts have begun to consider some of those lawsuits, and the outcome could determine whether crypto companies can continue operating in the United States. Many skeptics are not convinced that digital currencies provide much utility in the real world.
“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 dependability.”
Bitcoin was invented after the 2008 financial crisis by a mysterious developer using the pseudonym Satoshi Nakamoto. Digital coins were originally conceived as a decentralized alternative to the traditional financial system, a way for people to exchange money without relying on banks or other intermediaries.
But as Bitcoin increased in value, it became a medium for financial speculation. The value of the currency rose rapidly, then fell just as rapidly – one day new millionaires were created and the next day their savings were gone.
Early in the pandemic, a surge in day trading by amateur investors helped turn cryptocurrencies into a hot commodity. The industry promoted itself in splashy magazine spreads and Super Bowl commercials, driving up the price of Bitcoin.
The bubble burst within a year. A series of corporate implosions culminated in the collapse of Mr. Bankman-Fried’s exchange FTX in November 2022. Investors lost billions of dollars as the price of Bitcoin fell to around $16,000.
The industry’s fortunes began to improve in August, when a federal appeals court paved the way for companies to offer Bitcoin-linked ETFs. An ETF is essentially a basket of assets divided into shares. Investors buy shares in a basket rather than owning the assets directly.
In the crypto world, this means investors can get exposure to Bitcoin without mastering the technical details of digital currency wallets, or handing over large sums of money to fly-by-night firms with checkered legal histories. Financial giants like BlackRock and Fidelity are offering Bitcoin investment products, providing stability to a volatile industry.
For years, crypto advocates have predicted that the approval of a Bitcoin ETF would bring billions of dollars of new investment into the industry, though some analysts have expressed skepticism about those projections.
Preliminary data suggests the impact has been significant. In recent months, the approval of investment vehicles combined with other factors have driven up the price of Bitcoin.
“During every period when you are in the doldrums, it seems like crypto and Bitcoin will never come back,” said John Todaro, an analyst at Needham who tracks the crypto industry. “But we’ve seen over and over again that it continues to move forward.”
Later this year, the amount of new Bitcoins in circulation will be reduced due to an event called “halving.” The event, which was programmed into Bitcoin’s underlying code, will halve the amount of Bitcoin that people receive when they run software to validate crypto transactions (a process commonly known as “mining”). Is).
Some analysts argue that the prospect of lower Bitcoin supply has helped drive up its price this year. And with halving expected in the spring, Bitcoin proponents predict prices will continue to rise.
“This is just the beginning of this bull market, as prices have been skyrocketing this month,” said Nathan McCauley, chief executive of crypto company Anchorage Digital. “The best is yet to come.”
