Bitcoin prices soar, following post-approval surge in demand
Bitcoin ETFs have seen more demand than previously expected, following last month’s approval by the US Securities and Exchange Commission.
Bitcoin prices soared to $51,757 (€48,274) on Wednesday afternoon, reaching their highest level since December 2021, driven by a surge in demand for Bitcoin exchange-traded funds (ETFs).
The approval of the first US-listed Bitcoin ETF by the US Securities and Exchange Commission in January 2024 marked a historic milestone for the global cryptocurrency industry.
Despite initial expectations, investor response was tempered by lingering concerns over cryptocurrency risks. However, within just 30 days of approval, Bitcoin ETFs had already captured approximately 5% of the total tradable Bitcoin supply, as noted by Anthony Pompliano, founder of Pomp Investments, as reported by CNBC.
At that time, major players such as Fidelity, BlackRock, Invesco, Ark Investments, and VanEck all submitted applications to offer ETFs, aiming to secure significant market share.
Investors anticipate more gains following April Bitcoin halving
As Bitcoin’s upcoming halving event approaches in April, investors are actively acquiring the cryptocurrency in anticipation of significant price increases post-event. A pivotal occurrence in the cryptocurrency sphere, a Bitcoin halving event occurs when the mining reward is halved.
This reduction occurs after a predetermined number of blocks have been mined and serves to decrease the circulating supply of Bitcoin, as the cryptocurrency possesses a fixed total supply. Consequently, this mechanism contributes to upward pressure on Bitcoin’s price, as the influx of new coins diminishes.
Historically, following previous halving events, Bitcoin’s price has experienced sustained growth for approximately a year, often reaching new all-time highs during this period. Therefore, it’s plausible that investors are positioning themselves for a similar trajectory following the April event.
Why is Bitcoin suddenly seeing so much interest?
In addition to the sudden surge in interest driven by the increasing popularity of ETFs, Bitcoin is also riding the wave of a broader financial market rally, impacting indices like the S&P 500, which recently reached record highs, surpassing 5,000 points.
This optimistic outlook is primarily fueled by heightened investor anticipation regarding potential rate cuts by major central banks such as the US Federal Reserve, the European Central Bank (ECB), and the Bank of England, expected to occur in the spring or summer.
However, both US Federal Reserve Governor Jerome Powell and ECB President Christine Lagarde have cautioned against premature or excessive monetary easing. They underscore the importance of maintaining vigilant oversight over inflation by closely monitoring incoming economic indicators and adopting a data-driven approach. Key metrics include gross domestic product (GDP), inflation rates, retail sales, and unemployment figures, among others.