Since the start of the year, the bitcoin price has increased by around 50 percent. And it looks like it will soon exceed its all-time-high from November 2021. The party may even go on, provided the bitcoin ETF inflows continue and bitcoin’s halving event restricts supply.
The surge in demand which was anticipated at the time the crypto ETFs were approved by the Securities and Exchange Commission (SEC) in the United States in January and the upcoming halving event for bitcoin mining have caused the value of bitcoin to rise sharply over recent weeks.
At the start of the year, the oldest cryptocurrency was traded at $44,172. The value of bitcoin has increased to $69,350 and marked an all-time high.
Bitcoin ETFs With High Inflows
When spot bitcoin ETFs were approved in January, this caused the capital flow into these products to increase. «Reuters» reports that around $2.17 billion have flowed into spot bitcoin funds in the last week. According to data from the London Stock Exchange, more than half of this amount is going into the iShares Bitcoin Trust from BlackRock. The approval is seen as the starting gun for investments in crypto values from wider groups of investors and institutional investors.
New Bitcoin Halving
This effect is also attributed, in part, to the so-called bitcoin halving. This is where the value that a bitcoin miner receives as a reward when they successfully add a block to the bitcoin blockchain (essentially providing the processing power required to verify transactions) is halved. The «Proof of Work» process means that new bitcoins can only be created through processing capacity. Halving means that over time, there are fewer and fewer bitcoins in circulation. The fourth halving event since bitcoin was developed is scheduled to take place on April 21, 2024. At present, around 900 bitcoins are created per day through mining activities. At the halving event, this value will be halved.
Both effects have led to a new enthusiasm for bitcoin. And in view of the currently rather favorable financial markets overall, more investors are prepared to go after more speculative assets as well, and jump on the bandwagon.
High Volatility
But woe to those who miss the signs that the party is coming to an end. After the last all-time-high, it took only two months for the price to drop to around $35,000 – losing nearly half its value. One year after the last all-time-high, bitcoin was still only traded at around $17,000.
At the end of February, the ECB – known for its critical stance when it comes to crypto values – warned of the dangers linked with bitcoin investments in a blog post. The blog post describes them as «the emperor’s new clothes,» making reference to the fairy tale by Hans Christian Andersen.
Promises Not Kept
«Bitcoin has failed on the promise to be a global decentralized digital currency and is still hardly used for legitimate transfers,» writes the European Central Bank. «The latest approval of an ETF doesn’t change the fact that Bitcoin is not suitable as means of payment or as an investment.»
For supporters of bitcoin, the formal approval by the SEC confirms that bitcoin investments are safe, and the preceding rally is deemed proof of an unstoppable triumph. «We disagree with both claims and reiterate that the fair value of Bitcoin is still zero.»
