Bitcoin reached a record high of more than $69,000 on Tuesday, capping a remarkable comeback for the volatile cryptocurrency after its value plunged in 2022 amid a market collapse.
Bitcoin's price has risen more than 300 percent since November 2022, a rise that few expected when the price fell below $20,000 that year. The previous record was just under $68,790 in November 2021, as cryptocurrency markets boomed and amateur investors poured their savings into experimental cryptocurrencies.
Corey Klipsten, CEO of Swann, a financial services company focused on Bitcoin, said the cryptocurrency had been declared dead for the 150th time. “Bitcoin continues to do what Bitcoin does, which is attract people to it where they take the time to actually learn about it.” “
The recent rise in Bitcoin has been driven by investor enthusiasm for a new financial product tied to the digital currency. In January, US regulators allowed a group of cryptocurrency companies and traditional finance companies to offer exchange-traded funds, or ETFs, that track the price of bitcoin. The funds provide a simple way for people to invest in cryptocurrency markets without directly owning the virtual currency.
As of last week, investors have poured more than $7 billion into investment products, driving Bitcoin's meteoric rise, according to Bloomberg Intelligence.
The price of Ether, the second largest digital currency after Bitcoin, has also risen by more than 50 percent this year, reaching about $3,800. The increase was driven in part by excitement over the possibility that regulators may also approve Ethereum-linked ETFs.
But cryptocurrencies are still volatile. Within a few minutes of setting the record, Bitcoin's price fell to around $67,500.
Despite the euphoria, the cryptocurrency industry is still navigating the legal consequences of the 2022 crash. Sam Bankman Fried, the disgraced founder of collapsed cryptocurrency exchange FTX, is set to be sentenced to prison at the end of this month. The Securities and Exchange Commission has sued several prominent cryptocurrency companies, including US exchange Coinbase, arguing that the companies are offering unregistered securities.
Courts are beginning to consider some of these lawsuits, and the outcome could determine whether cryptocurrency companies can continue to operate in the United States. Many skeptics remain unconvinced that cryptocurrencies offer much benefit in the real world.
“There is no inherent value,” said John Reed Stark, a former SEC official and outspoken critic of the cryptocurrency industry. “There is no track record of adoption or adoption.”
Bitcoin was invented in the wake of the 2008 financial crisis by a mysterious developer using the pseudonym Satoshi Nakamoto. Digital currency was originally envisioned as a decentralized alternative to the traditional financial system, a way for people to exchange money without relying on banks or other intermediaries.
But as the value of Bitcoin rose, it became a means of financial speculation. The price of the currency rose rapidly, before falling just as quickly, as new millionaires emerged one day, then wiped out their savings the next.
In the early part of the pandemic, an increase in day trading by amateur investors helped turn cryptocurrencies into a hot commodity. The industry promoted itself in glamorous magazines and Super Bowl commercials, sending the price of Bitcoin soaring.
Within one year, the bubble burst. A series of corporate implodes culminated in the November 2022 collapse of FTX, Mr. Bankman-Fried's exchange. Investors lost billions of dollars, as the price of Bitcoin fell to around $16,000.
The industry's fortunes began to improve in August, when a federal appeals court cleared the way for companies to offer bitcoin-linked ETFs. An exchange-traded fund (ETF) is essentially a basket of assets divided into shares. Investors buy stocks in the basket, rather than owning the assets directly.
In the world of cryptocurrencies, this means investors can get exposure to Bitcoin without mastering the technical details of a cryptocurrency wallet, or entrusting large sums of money to fly-by-night companies with checkered legal histories. Financial giants like BlackRock and Fidelity offer Bitcoin investment products, providing a measure of stability to a volatile industry.
For years, cryptocurrency proponents have predicted that the approval of Bitcoin ETFs will bring billions of dollars in new investment to the industry, although some analysts have expressed doubts about these predictions.
Early data suggests the effect has been significant. In recent months, the approval of investment vehicles has combined with other factors to push up the price of Bitcoin.
“During every period of despair, it seems like cryptocurrencies and bitcoin will never come back,” said John Todaro, an analyst at Needham who tracks the cryptocurrency industry. “But we've seen time and time again that it continues to move forward.”
Later this year, the amount of new bitcoins to be put into circulation will decrease due to an event known as the “halving.” This event, programmed into Bitcoin's core code, will halve the amount of Bitcoin people receive when running software to validate cryptocurrency transactions (a process known as “mining”).
Some analysts have argued that the potential scarcity of Bitcoin has helped push up its price this year. With the halving expected to occur in the spring, Bitcoin advocates expect prices to continue rising.
“This is just the beginning of this bull market,” said Nathan McCauley, CEO of cryptocurrency firm Anchorage Digital, as prices rose this month. “The best is yet to come.”
