The crypto markets are in the midst of a full-blown rally as Bitcoin, after crossing the psychologically important $50,000 mark on Feb. 12, shot upward again this week with the currency trading for around $61,400 shortly before noon ET on Wednesday.
The breakout puts Bitcoin’s price at its highest level since November 2021, the peak of the last crypto boom, when the top cryptocurrency by market cap hit its all-time high of around $69,000.
Bitcoin is famous for its volatility and there is rarely a single factor to explain its periodic surges and crashes, but in the case of the current rally, an influx of institutional money has driven demand following the approval of a spate of Bitcoin ETFs by the Securities and Exchange Commission in early January.
Those approvals brought major names from traditional finance, notably BlackRock and Fidelity, into the Bitcoin space. On Tuesday alone, Blackrock’s industry-leading iShares bitcoin ETF (IBIT) pulled in $520 million of new inflows, partly due to the company’s many affiliates offering the cryptocurrency to their customers for the first time.
“Bitcoin demand is colliding with increasingly tight supply. The new U.S. spot Bitcoin ETFs have pulled in an average of $195 million per calendar day in February,” said Zach Pandl, head of research at Grayscale, another major player in the new industry. “There is simply not enough Bitcoin to accommodate all the new demand, and so natural supply/demand dynamics are driving prices higher.”
Pandl also pointed to the impending “halving”—a once-every-four-years event when the daily new supply of minted Bitcoin is cut by 50%—as a reason for the surge in demand. The next halving, which will see the volume of new coins drop from about 900 per day to 450, is expected around April 19.
The current rally has seen Bitcoin climb around 40% since the start of the year, creating a vibe in the industry that’s a far cry from late 2022 when the price tanked to around $16,000 in the wake of numerous scandals, including the collapse of fraudster Sam Bankman-Fried’s FTX.
The current Bitcoin rally, as has been the case in previous booms, also has coincided with other cryptocurrencies surging. Those include the smart contract platform Ethereum, the second-biggest crypto by market cap, which is trading around $3,300 after falling close to the $1,000 mark in 2022.
The return of the crypto bull market is likely to put pressure on regulators, who have sought to further the Biden administration’s policy of reining in the industry but faced setbacks in court—most notably when an appeals panel forced the SEC to take steps to approve Grayscale’s ETF petition last summer.
