(Bloomberg) — Bitcoin is maintaining a record run, supported by unprecedented amounts of capital flowing into cryptocurrency products as well as an impending decline in the growth of the digital token supply.
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The native cryptocurrency reached an all-time high of nearly $72,881 on Monday and was trading at $72,220 as of 7:15 a.m. in London on Tuesday. A record $2.7 billion flowed into cryptocurrency assets last week, according to a report by CoinShares International Ltd, with the bulk of that amount going into Bitcoin. Both the token and the measure of the top 100 coins are up nearly 70% this year.
The success of Bitcoin exchange-traded funds that launched in the US on January 11 is a major driver of the recent momentum. ETFs have attracted the likes of BlackRock Inc. Fidelity Investments has net inflows of about $9.5 billion to date. In the UK, the London Stock Exchange said it would accept applications for Bitcoin and Ether exchange-traded securities, while the Securities Commission of Thailand indicated it would open offshore cryptocurrency ETFs to retail buyers.
Institutional demand
“We are seeing institutional adoption in the United States,” Ophelia Snyder, co-founder and president of 21Shares, said on Bloomberg TV. “It's still very early. Not all institutions, not all wire houses, have access to it.
She added that the structure of the Bitcoin market is changing as it enters the fray, for example a greater focus on trading hours in the United States.
Some commentators point to the potential for further gains. Bitcoin “is expected to be well supported on dips by those looking to take a position to push toward $80,000 in the coming months,” Tony Sycamore, a market analyst at IG Australia Pty, wrote in a note. Katie Stockton, technical analyst for Fairlead Strategies LLC, also noted that $80,000 is within reach in the medium term.
Futures market
In the derivatives sector, outstanding contracts – or open interest – in Chicago-based CME Group's Bitcoin futures market have reached a new peak. The number exceeded 30,000 for the first time on Monday, according to data compiled by Bloomberg. This increase is a sign of increased US institutional demand for cryptocurrency exposure and hedging.
Bitcoin's rise is creating roughly 1,500 new “millionaire wallets” every day, according to cryptocurrency analytics firm Kaiko Research, though the nature of blockchain data means it's difficult to determine which of these wallets are held by individuals and which are owned by businesses. This is still below the pace of millionaire wallets minted during the token's 2021 bull run, when more than 4,000 wallets per day reached the $1 million mark.
Next month, Bitcoin will undergo an event known as the halving, which as the name suggests halves the supply of new Bitcoin. Demand from ETFs, limited supply and expectations of a more flexible monetary policy are all sparking a bullish mood in cryptocurrencies – prompting investors to put aside memories of 2022's painful and profound bear market.
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