Bitcoin continues its remarkable start to the year after it crossed $57,000 on Tuesday, the cryptocurrency’s highest valuation in two years, as it edges ever closer to the record high of $69,044 it touched in November 2021.
According to data procured by Coindesk, the largest cryptocurrency by market capitalization surged past the $56,000 marker on February 27th before tracking back to $56,704. At the time of writing, BTC is trading at $57,129 – up 2.2% in the last 24 hours.
SEC’s Approval of Spot Bitcoin ETFs Pivotal in Increasing Investor Demand for BTC
Since the turn of the year, Bitcoin’s value has risen nearly 30%.
Sentiment for the leading crypto asset was reignited after the Securities and Exchange Commission (SEC) approved the first batch of spot exchange-traded funds (ETFs) backed by Bitcoin on January 10.
These ETFs allow retail and institutional investors to track the price of Bitcoin and trade shares accordingly. The funds have opened up the option for financial advisers to offer the decentralized digital asset to interested customers.
Experts believe investor interest in Bitcoin has renewed because of the investment vehicles, and they are largely responsible for the cryptocurrency closing in on its all-time high.
In an interview with FOX Business, Roxanna Islam, head of sector and industry research at New York-based financial consultancy firm VettaFi, said she believes the spot Bitcoin ETFs are the main drivers of the BTC rally. Excluding Grayscale Bitcoin Trust (GBTC) ETF, these funds have amassed over $6 billion in net inflows since their launch early last month, she noted.
Why is Bitcoin Rising This Week?
Bitcoin’s price has risen by more than 10% this week, and there are several factors at play here.
Eleven Bitcoin-focused funds hit the market after the SEC greenlit them in January and over $6 billion have entered the market since they began trading.
On Monday, nine of these ETFs recorded a combined daily trading volume of $2.4 billion, with Wall Street giant BlackRock’s iShares Bitcoin Trust (IBIT) ETF couping up most of the inflow at $1.3 billion.
The fund’s assets under management (AUM) figure topped the $7 billion mark at the start of the week. The firm itself is considered the world’s largest money manager with over $9 trillion in AUM.
Spot Bitcoin ETFs from Fidelity, Franklin Templeton, Invesco, VanEck, WisdomTree, Bitwise, Hashdex, and Valkyrie also attracted a considerable amount from investors.
Robinhood, one of the brokerage platforms offering all eleven spot Bitcoin ETFs noted that the funds are attracting investor interest in Bitcoin.
During the company’s February earnings call, chief financial officer Jason Warnick said the ETFs have increased overall market interest in crypto and also bring more liquidity to the market.
“So, net-net, we’re pleased with the Bitcoin ETFs,” said the CFO.
Halving will Reduce Supply and Increase Demand for Bitcoin
Another contributor to increasing demand for the apex cryptocurrency is the upcoming “halving” event on its blockchain. By the end of April, the reward miners get for verifying transactions and creating blocks on the Bitcoin network will be reduced by half, from 6.25 BTC to 3.125 BTC.
This once-in-four-year process reduces the rate at which new Bitcoins are created, making the tokens scarer while increasing their value based on the supply and demand principles of economics. Halving will continue to occur until all 21 million Bitcoins are mined.
MicroStrategy Adds 3,000 Additional BTC to its Treasury
Meanwhile, enterprise software and cloud service firm MicroStrategy revealed earlier this week that it purchased 3,000 BTC for $155.4 million in February. The company founded by pro-Bitcoin advocate Michael Saylor now holds a total of 193,000 BTC worth nearly $10 billion in its reserves.
MicroStrategy is the largest publicly traded corporate holder of the cryptocurrency.
Bitcoin is a little over $10,000 away from the all-time high of $69,000 it hit in November 2021.
