The price of bitcoin (BTC) has set a record high, rising above $69,000 on crypto exchange Coinbase, a level first touched on Nov. 10, 2021.
A continuing massive wave of buying by the newish U.S.-based spot bitcoin ETFs is the likely catalyst behind what’s now a historic run higher. The price of bitcoin sat at around $45,000 at the time the ETFs opened for business on Jan. 11. Following a brief “sell the news” dip to the $39,000 area, bitcoin quickly rallied above $50,000 by mid-February. After meandering around the $51,000 level for a couple of weeks, prices took off again to the upside towards the end of the month.
“Hard to predict where we stop,” early bitcoin adopter and Galaxy Digital CEO Mike Novogratz posted on X on Feb. 28, when the record was in sight. “Bitcoin is in price discovery phase. Maybe really for the first time since it’s been an asset as now the bulk of U.S. wealth has easy access.” Novogratz’s Galaxy, teaming with asset management giant Invesco, is among the issuers of the 10 U.S.-based spot ETFs now available.
Hunter Horsley, CEO of Bitwise – another of the spot ETF issuers – suggested things are just getting started, with $250,000 bitcoin nearing faster than even bulls might fathom.
Third bull run
Market observers say that bitcoin, the world’s largest digital asset with a market cap of now well over $1 trillion, stepped into a bull market in mid-2023 when BlackRock, the world’s largest asset manager, began the process of filing to list a bitcoin exchange-traded fund (ETF).
This would mark the third bull run for bitcoin, which is driven by the market’s acceptance of bitcoin as an institutional-grade asset class via the ETF alongside macroeconomic factors that are going in bitcoin’s favor.
In a note sent to CoinDesk, Aurelie Barthere, an analyst with Nansen, suggested that the slowdown and end of Fed rate hikes also likely contributed to BTC bottoming in 2022 and the rally after November 2023, with tech stocks also reaching new highs due to AI narratives. The prospect of the Bitcoin Halving, Barthere wrote, is seen as a tailwind for crypto prices, with historical data showing superior returns around the Halving period.
“The strong performance of risk assets overall, like crypto, equities, credit, tell us that financing conditions have probably loosened, especially since November last year and the peak in rates,” Barthere wrote. “Investors are also really sanguine about macro prospects (recession no longer consensus), and the risk premium linked to uncertainty about a potential growth shock has come down.”
Analysts also pointed to the end-of-2023 rally as being marked by a lack of liquidity, with David Lawant, FalconX’s head of research, writing in October 2023 that a shortage of willing sellers was a factor in driving up prices.
Bitcoin’s second bull run looked a bit different
Driven by Covid-era monetary policy, the major regulatory changes allowing institutions to embrace bitcoin, the maturing of Ethereum which allowed for Decentralized Finance (DeFi) to take off, as well as record venture capital investment in the space, bitcoin rallied throughout most of 2020-2021 before hitting a then-all-time-high of $69,045. But then record-setting inflation and subsequent Fed rate hikes first pushed crypto prices down in the first quarter of 2022. That, however, was just a preview of what would be an annus horribilis for digital assets that began with the collapse of Do Kwon’s Luna, was punctuated with the implosion of Celsius and Three Arrows Capital, and finally the demise of Sam Bankman-Fried led FTX.
And finally, bitcoin’s first rally
While 2022 was certainly an exciting year, 2017 might be a runner-up as far as crypto roller coasters go. Bitcoin began the year at just over $900 and ended within inches of $20,000. Along the way, there were regulatory actions by China’s central bank, the SEC’s rejection of the Winklevoss ETF, and eventually the Initial Coin Offering (ICO) bubble.
ICOs, as history would later show, were largely scams with the majority being nothing more than vaporware (however, some of the most important projects we now have in crypto came from this era but they were few and far between).
Selling pressure from the end of the ICO era pushed bitcoin down over 70% from its 2018 highs and kicked off the 2018-2019 crypto winter where bitcoin bottomed out at $3,100 before slowly climbing back up to begin the rally that began as Covid stimulus kicked off in March 2020.
