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Bitcoin hits new all-time high near $69,000 before falling
Bitcoin (BTC-USD) hit an all-time high on Tuesday before falling again as some investors locked in their gains.
A new frenzy around the world’s largest cryptocurrency pushed the price to $68,869, surpassing the previous high of $68,789 set on November 10, 2021. It then fell back below the $60,000 level within hours .
The new high reinforced bitcoin’s remarkable comeback after a 2022 crash that created huge losses for investors and triggered the downfall of several major players in the industry, including cryptocurrency exchange FTX and its founder Sam Bankman -Fried.
The dramatic pullback from Tuesday’s high was a reminder of just how much volatility still surrounds this digital asset. At one point, it was down 11%, the kind of decline last seen during the tumult of 2022.
So far this year, Bitcoin has ridden a wave of enthusiasm sparked by a series of Bitcoin spot exchange traded funds which began trading in January. These funds gave ordinary investors broad exposure to the digital asset, sparking anticipation of a record year.
Learn more: With bitcoin near $69,000, does it deserve a place in your wallet?
“Demand for these ETFs has far exceeded all expectations,” Matt Hougan, chief investment officer of Bitwise Asset Management, told Yahoo Finance. Bitwise was among the companies that got the green light from the Securities and Exchange Commission to manage one of these funds.
Several fund managers are now predicting that the digital asset could surpass $100,000 before the end of 2024.
Investors are also bidding higher on other cryptocurrencies and related stocks. Ether (ETH-USD), the second largest cryptocurrency, has outperformed bitcoin by more than 7% year to date. Several so-called meme coins, such as dogecoin (DOGE-USD), Shiba Inu (SHIB), and dogwifhat (Wireless) – are also on the rise.
The ETF trading activity launched in January is a sign of the new mania around Bitcoin. They raised nearly $8 billion from investors in just two months, with the lion’s share going to Wall Street heavyweights like BlackRock (BLACK) and Fidelity Investments.
This activity has been a boon for major crypto trading platforms, including Coinbase (PIECE OF MONEY) and Robinhood (HOOD). Coinbase is the cryptocurrency custodian for a number of these ETFs and earns fees directly related to these products.
THE trade request on Coinbase was so intense last week that it resulted in a snafu where some customers showed $0 balances in their accounts for part of the day. CEO Brian Armstrong assured customers that their funds were safe.
The story continues
Some individual customers reported seeing zero balances in their accounts again on Monday.
Brian Armstrong, CEO of Coinbase. (Brendan McDermid/REUTERS) (REUTERS / Reuters)
Supply and demand
There is also a fundamental law of economics that comes into play in the new market frenzy around bitcoin: supply and demand. The new demand for ETFs means that more bitcoins are purchased on average every day that new coins are created.
New ETFs have been buying an average of between 3,320 and 4,300 coins per day since early February, three analysts who work for cryptocurrency managers said last week.
This is far more than the 900 coins created daily by the Bitcoin network during the same period.
More supply issues are expected for bitcoin this year, in light of the “halving” scheduled for 46 days starting Monday.
When it was created in 2009 by pseudonymous developer Satoshi Nakamoto, bitcoin was programmed with a fixed supply schedule that is halved every four years.
After the next reduction, called halving, the daily supply of new coins will be 450 instead of 900.
“We are potentially in the best situation here,” Mark Connors, head of research for crypto asset manager 3iQ, told Yahoo Finance. “We cannot produce more bitcoins to meet demand.”
Connor’s company set its mid-to-high-end price target for bitcoin this year at $160,000 to $180,000. Next year, he projects an impressive target of $350,000 to $450,000 per piece.
Another fund manager, VanEck, set a 2024 price target of $80,000 for bitcoin last quarter.
“Those estimates are admittedly a little bit outdated now,” said Matthew Sigel, head of digital assets research at VanEck.
There are certainly other factors at work in the current supply crisis, beyond ETF demand.
One example: The US government has seized 215,000 BTC since 2020, according to data tracked by 21Shares. The stash includes confiscations during various seizures, such as during the hack of crypto exchange Bitfinex in 2016.
The fact that they are simply being held and not sold at this time has limited supply. But that could change when the government has to distribute part of this sum to victims, which could involve selling it.
As asset prices rise, many institutional buyers will also need to take profits to keep their portfolios balanced. This could also impact the imbalance between supply and demand.
There are also certainly less fundamental, and more psychological, factors at the origin of this new rally, notably the fear of missing out.
Interest in bitcoin among the general U.S. population is nowhere near its peak compared to previous rallies, Alex Thorn, head of research for Galaxy Digital, said via email Monday.
According to Thorn, Google searches for “bitcoin” and retail usage of crypto apps remain well below the levels seen during the last bull market.
“We haven’t even started to reach the heights that we’re likely to reach yet,” Thorn added.
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto and other areas of finance.
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