Why Bitcoin is closing in on its record high
Bitcoin on Monday rallied to above $57,000, just 17% away from its record high reached in November 2021.
There isn’t a particular catalyst for the jump on Monday, analysts said, as bitcoin BTCUSD’s rally so far this year has been mostly driven by continued inflows into bitcoin exchange-traded funds and optimism around the upcoming “halving event,” which is expected to happen in April.
Bitcoin is up 29% so far this year, building on an over 150% gain in 2023, according to CoinDesk data.
Since the U.S. Securities and Exchange Commission approved 10 bitcoin ETFs for the first time in January, such products have seen a total net inflow of $1.2 billion, according to Dow Jones Market Data. BlackRock’s iShares Bitcoin Trust has seen the highest net inflow, with $5.9 billion going into the fund so far.
Investors seeking growth and diversification are adding digital assets to their holdings, as some of them are worried inflation may reaccelerate and it remains uncertain when the Federal Reserve will start cutting its key interest rate, according to Bill Zielke, chief revenue officer at bitcoin payment company BitPay.
Meanwhile, most industry participants are eyeing “halving” to be a major catalyst of bitcoin price.
Halving is a mechanism written in the blockchain’s algorithm to control the supply of bitcoin, which has a cap of 21 million. At halvings, the reward for bitcoin mining is cut in half, meaning miners will receive 50% fewer bitcoins for verifying transactions. Halvings are scheduled to happen after every 210,000 blocks that are mined — or about every four years — until the maximum supply of 21 million bitcoins is all released.
Historically, bitcoin has seen price appreciation months after halvings.
Bitcoin’s rally on Monday also mostly happened at the start of the trading hours in Asia following the end of U.S. trading hours, noted Leah Wald, chief executive and co-founder at asset manager Valkyrie Investments.
It shows that bitcoin is gaining traction globally, not just in the U.S., even though the debut of bitcoin ETFs in the U.S. contributed to an increased U.S. market share in bitcoin trading, Wald noted in a call.
