Bitcoin kicked off the week by extending its recent gains and reaching another record high. The world’s leading cryptocurrency surpassed $72,000, driven by a surge in investments into US-based Bitcoin ETFs. According to Coin Metrics, Bitcoin reached an all-time high of $72,750.16 before settling at $72,022.16, a 3% increase.
Last week saw similar volatile trading as Bitcoin established new records for the first time since 2021. However, the weekend brought a period of subdued activity. The current rally is largely attributed to inflows into US Bitcoin ETFs. CoinShares reports that crypto investment products saw a record-breaking $2.7 billion last week, bringing the year-to-date total to a staggering $10.3 billion. This figure is nearly equal to the record set for all of 2021 ($10.6 billion).
While the price action is positive, it comes with a degree of volatility. The increased leverage in the crypto market has resulted in the most significant price swings in nearly a year. Funding rates are at their highest levels since January 2021, and Bitcoin open interest is at an all-time high.
Ether, the second-largest cryptocurrency, also experienced a significant rise, breaking through the $4,000 barrier for the first time since December 2021. Its price climbed 3% to reach $4,034.00. This rise is partly attributed to the momentum of Bitcoin. Additionally, investors are anticipating the Ethereum network’s upcoming major upgrade, dubbed “Dencun.” However, historical trends suggest that while the crypto asset may rally in the lead-up to the upgrade, a sell-off could follow.
Analysts like Citi’s Alex Saunders believe that Dencun’s impact on price action could be different this time around. The current market is influenced by several other strong crypto catalysts, including the aforementioned Bitcoin ETF inflows, the approaching Bitcoin halving (which will significantly reduce the number of new Bitcoins created), and the potential approval of spot ether ETFs by the US Securities and Exchange Commission (SEC) in May.
The price movements of companies tied to Bitcoin varied. Cryptocurrency exchange Coinbase initially rose but closed flat as the broader tech rally cooled. In contrast, Bitcoin proxy MicroStrategy jumped 4% after acquiring an additional 12,000 Bitcoins for over $821 million in cash.
However, Bitcoin mining companies like Marathon Digital (down 12%), CleanSpark (down 16%), Iris Energy (down 5%), and Riot Platforms (down 4%) saw their stocks decline. These companies experienced significant gains in February but have fallen in March as investors grapple with the impending Bitcoin halving, which will significantly reduce their revenue.
UK Embraces Crypto-Linked Investments
The week also saw positive regulatory developments in the UK. The Financial Conduct Authority (FCA) announced that it would allow cryptocurrency-linked exchange-traded products (ETPs) to be listed on exchanges for the first time. This follows the introduction of spot Bitcoin ETFs in the US two months ago.
Specifically, the FCA will not object to requests from recognized investment exchanges to create a UK-listed market segment for crypto-backed exchange-traded notes (ETNs). The London Stock Exchange confirmed that it will begin accepting applications for the listing of Bitcoin and Ether ETNs starting in the second quarter of this year.
While different from ETFs (which hold underlying assets), ETNs are unsecured debt securities offered by banks and typically track a market index or benchmark. Proponents of Bitcoin see this move as a catalyst for increased institutional investment in cryptocurrencies, potentially driving prices even higher due to an influx of fresh capital.
This information is not legal advice. Do your own research before making any decisions. Only invest what you can afford to lose and seek independent financial advice if needed. Understand the risks involved before purchasing any cryptoasset