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Bitcoin hits record high, then tumbles
By Hannah Lang, Amanda Cooper and Ankur Banerjee
WASHINGTON/LONDON/SINGAPORE (Reuters) – Bitcoin hit a record high on Tuesday, fueled by investors pouring money into U.S. exchange-traded crypto spot products and the prospect of a decline in global interest rates.
The world’s largest cryptocurrency hit a high of $69,202, surpassing the November 2021 all-time high of $68,999.99. Investor interest has increased since the Securities and Exchange Commission approved 11 spot Bitcoin ETFs in late January. It then reversed course and was recently down about 7% to $63,400.
“Bitcoin’s all-time high marks a turning point for crypto,” said Nathan McCauley, CEO and co-founder of crypto platform Anchorage Digital. “Traditional institutions were once left behind; today, they are here in full force as the main drivers of the crypto bull market.
The cryptocurrency’s latest meteoric rally could have more length than 2021 as more institutional investors commit long-term money that could help the token maintain its high levels this time around , believe some experts.
Bitcoin’s nearly 160% increase since October, including 44% in February alone, stands in stark contrast to 2022, when the market was plunged into an 18-month crypto winter, plagued by a series of bankruptcies and high-profile corporate scandals. .
Net flows into the 10 largest U.S. spot Bitcoin funds reached $2.2 billion in the week ended March 1, with more than $2 billion flowing into BlackRock’s iShares Bitcoin Trust , according to LSEG data.
“Bitcoin has been rising for several days,” said Steve Sosnick, chief strategist at Interactive Brokers. “It’s normal to see a little profit-taking when an asset becomes so extensive.”
RISK ON
In addition to demand from more investors, bitcoin and crypto in general have been boosted by the prospect of the Federal Reserve cutting U.S. interest rates, which often prompts investors to divert their capital towards higher yielding or more volatile assets.
“Part of (Bitcoin’s rally) has to do with the generally positive sentiment towards risk in general,” said Alvin Tan, head of Asia foreign exchange strategy at RBC Capital Markets. “You can see it in the all-time highs of the S&P. 500 and Nasdaq.”
Investors have particularly liked cryptocurrencies, large-cap technology stocks and investment-grade corporate bonds this year.
Also on Tuesday, gold hit a record high, again surpassing $2,100 an ounce in a rally sparked by growing bets on a cut in U.S. interest rates in June.
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“(Cryptocurrencies) are now being used as an alternative to gold when markets seek to protect against increased risks and higher interest rates,” said Stuart Cole, chief economist at Equiti Capital. “So, it’s no surprise, I think when you see the price of gold go up, cryptos do the same.”
Analysts say Bitcoin also benefited from the so-called April halving event, a process that takes place every four years in which the rate of token releases is halved, as well as the rewards given to minors.
Bitcoin supply is limited to 21 million, of which 19 million have already been mined.
Despite its recent popularity, for many investors, bitcoin is simply too volatile and lacks enough real-world applications to be anything other than a speculative asset.
Yet aside from the cocktail of money flowing into ETFs, the prospect of limited bitcoin supply and a possible drop in U.S. interest rates, some companies are adding crypto to their coffers.
In February, software company MicroStrategy – a long-time holder of Bitcoin – said it had recently purchased around 3,000 additional bitcoins for $155 million, while social media platform Reddit also said in a regulatory filing that it had purchased small amounts of bitcoin and ether.
On Monday, the number of dollar-pegged stablecoins issued by Tether surpassed $100 billion for the first time. Tether issues a stablecoin designed to maintain a constant value of $1 and is widely used as a way to move money in cryptocurrency without being exposed to the price fluctuations of other tokens such as bitcoin and ether.
The price of ether, the world’s second-largest cryptocurrency, was last trading at $3,486, well below its record high of $4,867 that it reached in November 2021.
“Active traders’ positioning in Bitcoin now appears quite long. Valuations for ether and most other tokens remain below their previous crypto cycle highs,” said Zach Pandl, head of research at Grayscale Investments.
Crypto stocks were trading lower on Tuesday, with shares of Coinbase down 5.4% and shares of crypto miners Riot Platforms and Marathon Digital down 9.1% and 13.4%, respectively.
(Reporting by Hannah Lang in Washington, Amanda Cooper in London and Ankur Banerjee in Singapore; additional reporting by Bansari Mayur Kamdar and Sinead Carew; editing by Lisa Shumaker)