Bitcoin ETFs have seen more demand than previously expected, following last month's approval by the US Securities and Exchange Commission.
ADVERTISEMENTBitcoin prices hit $51,757 (€48,274) on Wednesday afternoon, the highest since the beginning of December 2021, following surging demand for Bitcoin exchange-traded funds (ETFs).
The US Securities and Exchange Commission approved the first US-listed Bitcoin ETF in January 2024, in an historic move for the global cryptocurrency industry.
The initial response was not as expected, due to investors still being wary about the risks posed by cryptocurrency. However, in the 30 days following the approval, Bitcoin ETFs have already accounted for about 5% of total tradeable Bitcoin supply, according to Anthony Pompliano, the founder of Pomp Investments, as reported by CNBC.
At the time, Fidelity, BlackRock, Invesco, Ark Investments and VanEck all applied to offer the ETFs, in an attempt to gain as much market share as possible.
Investors anticipate more gains following April Bitcoin halving
With Bitcoin's next halving event coming up in April this year, investors are also buying the cryptocurrency now, to be able to sell for significantly more following the event. One of the most significant events in the cryptocurrency world, a Bitcoin halving event refers to a process during which the Bitcoin mining reward is slashed by half.
This happens once a certain number of blocks have already been mined and is mainly done to reduce the number of Bitcoin in circulation, as the cryptocurrency has a fixed amount of coins for the entirety of its lifetime. This also ensures that the Bitcoin price keeps rising, as new coins reduce.
In the past, after previous halving events, the price of Bitcoin has continued to rise for about a year, often hitting new record highs during this time. As such, it is likely that investors are preparing for a similar trend again after April.
Why is Bitcoin suddenly seeing so much interest?
Apart from the sudden interest due to ETFs gaining more traction, Bitcoin is also part of a broader financial market rally that affected indices such as the S&P 500 index, which recently hit all-time highs, at just above 5,000 points.
This positive sentiment is mainly due to more investor expectations of the US Federal Reserve and other major central banks such as the European Central Bank (ECB) and the Bank of England starting to cut rates in spring or summer.
However, both the US Federal Reserve governor Jerome Powell and ECB President Christine Lagarde have warned against monetary loosening happening too soon, or by too much.
They have also emphasised the importance of making sure that inflation is firmly under control by still keeping an eye on incoming economic data, and adopting a data-dependent stance. This includes gross domestic product (GDP), inflation, retail sales and unemployment reports, amongst others.
