Bitcoin price: Here's WHY world's largest cryptocurrency is reaching historic levels

Bitcoin price is on an upward trajectory, steadily closing in on its previous peak with remarkable speed
The image shows an illustration of Bitcoin. — Pixabay
The image shows an illustration of Bitcoin. — Pixabay

Bitcoin price is on an upward trajectory, steadily closing in on its previous peak with remarkable speed.

On Tuesday, the digital currency surged to hit $68,000, marking a significant leap from its valuation of $44,000 at the year's outset and placing it just shy of its November 2021 pinnacle of approximately $69,000.

Reason behind rising bitcoin price 

What's propelling this rally? Observers in the cryptocurrency sphere attribute bitcoin's ascent in part to the burgeoning demand for spot bitcoin exchange-traded funds (ETFs). These ETFs offer investors a relatively less risky avenue to engage with crypto, drawing a substantial influx of capital this year, according to experts.

"Investors are awakening to the idea of bitcoin as an uncorrelated asset, making it immensely appealing for portfolio diversification," remarked Joel Kruger, a market strategist at LMAX Group, a digital currency exchange.

Spot bitcoin ETFs enable investors to gain direct exposure to bitcoin without holding the digital asset itself. Unlike conventional bitcoin ETFs, where bitcoin futures contracts serve as the underlying asset, spot bitcoin ETFs directly hold bitcoins. 

Each spot bitcoin ETF is managed by a firm that issues shares backed by its own bitcoin reserves acquired through other holders or authorised cryptocurrency exchanges. These shares are then listed on traditional stock exchanges.

The approval of spot bitcoin ETFs by the US Securities and Exchange Commission in January marked a pivotal moment. Since then, investors have poured approximately $7.35 billion into the 11 available funds, as reported by Bloomberg on Monday. Notably, some of the world's leading institutional investors, including BlackRock and Fidelity Investments, now offer spot bitcoin ETFs.

Bitcoin all-time high price

Bitcoin's surge in price traces back to 2023 when it reached a 19-month high of about $41,000 in December. Analysts attribute this surge to several factors, including anticipation of SEC approval for spot ETFs, speculation surrounding Federal Reserve rate cuts, and the upcoming halving event, which slashes the reward for mining bitcoin by half.

However, it's crucial to acknowledge that bitcoin's ongoing price surge does not mitigate its inherent volatility, as highlighted by Laila Maidan, an investing correspondent at Insider. Maidan cautioned against assuming that the cryptocurrency's current momentum guarantees sustained high values.

"It doesn't mean the crypto is going to skyrocket and stay high," Maidan warned in December when bitcoin breached the $41,000 mark, its highest value in 19 months. "It's still volatile, and there are always traders who will capitalise on this."

Nonetheless, bitcoin's resurgence is a welcome development for crypto investors, many of whom weathered substantial losses in 2022 following the collapse of exchanges like FTX. As the world's largest cryptocurrency by trading volume and mining activity, bitcoin price often serves as a barometer of the crypto industry's overall health.