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Bitcoin traded as high as $69,200 on Tuesday, briefly setting a new all-time record for the world's largest cryptocurrency before pulling back.
The price has risen since US regulators in January approved spot bitcoin exchange-traded funds issued by Wall Street firms including Fidelity and BlackRock, the world's largest asset manager.
The new wave of capital has generated gains of more than 60 percent since the beginning of the year and helped push the major cryptocurrency token into uncharted territory, surpassing the record set in November 2021. However, within hours of reaching this milestone, the coin plunged. Bitcoin is up more than 8 percent to about $62,000.
More than $7.5 billion in capital has flowed into newly approved Bitcoin ETFs since the first day of trading on January 11, according to cryptocurrency investment group CoinShares.
“The excitement and hype around ETFs has exceeded anyone’s expectations,” said Jad Qamir, founder of digital asset investment firm Melanion Capital. Spot Bitcoin ETFs give investors the ability to get direct exposure to the cryptocurrency without the risks associated with largely unregulated cryptocurrency exchanges.
Bitcoin's recent record marks a turning point for the cryptocurrency, which traded as low as $16,000 amid a severe market crisis in 2022, and was often dismissed by skeptics as a burst bubble that would not recover after the collapse of prominent cryptocurrency companies including FTX.
“It's not just an amazing jump in price, but also a paradigm shift in bitcoin,” Comer said. “Today, investors allocating to bitcoin will be five or 10 times more confident than they were just two years ago.”
“We have to ask the question of whether or not we are missing something big,” said Luca Paolini, chief strategist at Pictet Asset Management. “The environment we are in now is very different than it was two years ago when we were clearly in bubble territory.”
The price of the token is also being pushed up by a rapid upgrade of the Bitcoin network – referred to as the Bitcoin halving – scheduled for next month, which will slow down the circulation of available coins. Bitcoin bulls expect this to continue fueling the cryptocurrency's bullish momentum.
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The race, which has achieved a dramatic pace even by Bitcoin standards, has drawn comparisons to 2021, when Bitcoin set its previous records after a wave of retail excitement.
“The current backdrop looks similar to the exuberant backdrop of 2021 when retail investors were driving the crypto and stock market rally simultaneously on momentum,” said JP Morgan analyst Nikolaos Panigirtzoglou.
Panigirzoglou warned that there was a “significant risk of profit taking” ahead of the Bitcoin halving event next month.
But despite Bitcoin's recent rise, liquidity has yet to return for the cryptocurrency industry's most popular token. According to figures shared by data provider CCData, liquidity at the 21 largest central exchanges is still far behind levels recorded at this time last year.
