Bitcoin surged to another more than two-year high on Wednesday, pushing its market cap back over $1 trillion as the growing success of U.S. spot bitcoin ETFs turned investor sentiment more positive.
The flagship cryptocurrency was last higher by 4% at $51,660.00, according to Coin Metrics. Earlier in the morning it rose to $52,079.00, its highest level since December 2021.
Its market cap, or the value of all the bitcoin in circulation, rose above $1 trillion for the first time since late 2021, according to CoinMarketCap.
Bitcoin rises to another December 2021 high, breaching $52,000 Wednesday.
The move was driven in part by increased demand for bitcoin thanks to the newly launched U.S. spot bitcoin ETFs as outflows from the Grayscale Bitcoin ETF (GBTC), which weighed on market sentiment for the earlier part of the past month, have greatly diminished.
“Yesterday, we saw $651 million [in] inflows, the largest daily inflow since the launch day,” James Butterfill, head of research at crypto-focused asset manager CoinShares, told CNBC.
“Furthermore, there were 12,000 bitcoins demanded by the issuers yesterday at a time when only 900 are produced every day. Investors are beginning to realize that demand is beginning to outstrip newly issued supply.”
Some $9.5 billion of new money has entered the bitcoin market through the funds since they began trading on Jan. 11, according to data provider CryptoQuant.
In the past two weeks, more than 71% of new money invested in Bitcoin has originated from the spot ETFs, not including GBTC.
Ether was last trading 4% higher at $2,743.08, after earlier touching a May 2022 high.
The bitcoin surge sent related stocks higher. Trading platform Coinbase surged 11% and bitcoin proxy Microstrategy rose 10%. Miners Iris Energy and CleanSpark rocketed to 17% and 14%, respectively, while Marathon Digital jumped 13%.
Bitcoin rallied 157% in 2023, as anticipation built for the U.S. Securities and Exchange Commission’s approval of bitcoin exchange-traded funds — or ETFs — which eventually came in January this year.
Although the price of bitcoin dipped after the ETF approvals, investors are still upbeat about the cryptocurrency’s setup for the year.
In addition to ETF inflows, they’re also closely watching the “halving” — a supply-restricting event written in Bitcoin’s code that happens every four years and is slated for April. Historically, halving has preceded Bitcoin hitting new all-time highs in the ensuing months.
“If the pace of bitcoin issuance slows while demand either remains steady or increases, the effect on price can be substantial,” said Duncan Ash, Head of Product go-to-market strategy at Coincover.
He added, “On Feb. 12 alone, bitcoin ETFs purchased ten times the amount of bitcoin that miners were able to create in a day.”
“The upcoming halving will reduce supply even further,” he added. “If the next halving follows the same pattern, we can expect continued growth in Bitcoin’s price during the months ahead.”
