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Bitcoin Boom: ETFs Bringing In Billions

Tuesday, April 02, 2024

Primary Blog/Stock Market/Bitcoin Boom: ETFs Bringing In Billions
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Since the new cryptocurrency related E.T.F.s debuted this year, more than $7 billion of net inflows in less than two months pushing up the price of Bitcoin. (Samuel Aranda for the NYT)

Crypto Enthusiasts Rejoice as Bitcoin nears record highs and reaches $69,000 as ETF Demand grows. That's a surge of over 45% in the price of the largest digital asset this year to about $63,000, bringing the pandemic-era record high of almost $69,000 into view. A looming reduction in Bitcoin’s supply growth, called the halving, has also stoked the rally.

This milestone marks a moment of validation for believers following a challenging period in 2022, which saw a downturn in the industry leading to bankruptcies and a tarnished reputation for cryptocurrencies.

But is the crypto market truly back in action? While the numbers indicate a resurgence in the industry, there are notable distinctions between this current bull run and the previous hype that drove crypto prices to unprecedented levels.

The last time Bitcoin reached a record high was in November 2021, during the peak of the cryptocurrency craze. But, the industry took a hit in the spring of 2022 when several prominent crypto firms were exposed as fraudulent. Many individuals who had invested their savings in crypto suffered significant losses. The downturn culminated in November 2022 with the collapse of the FTX crypto exchange, resulting in an $8 billion loss for customers.

Since then, Bitcoin has seen a remarkable recovery. After dropping to around $16,000 following the FTX incident, the price of Bitcoin has skyrocketed to $69,000.

A significant turning point for the crypto industry came in August with a court ruling that paved the way for financial institutions to offer new investment products linked to Bitcoin's price. These products, known as exchange-traded funds (ETFs), provided investors with a way to participate in the crypto market without directly owning the digital assets. ETFs function as baskets of assets divided into shares that investors can purchase. With the introduction of Bitcoin ETFs, cautious investors could enter the crypto market without the complications of setting up digital wallets or investing in risky startups.

The impact of Bitcoin ETFs was immediate. Since their introduction in January, over $7.5 billion has flowed into these investment products, driving the price of Bitcoin higher!

Bitcoin is leading the way. Other tokens have also risen in value, but without hitting their previous heights (though there has been some renewed interest in memecoins). The Bitcoin run-up has been driven by support from major financial institutions like BlackRock and Fidelity, which both offer Bitcoin ETFs.

“It definitely is very different” from 2021, said Michael Anderson, a founder of the crypto investment firm Framework Ventures. “It’s possible this is going to be an institutionally led cycle.”

Crypto boosters insist that Bitcoin’s surge is just the beginning. They envision months of significant gains that could send the cryptocurrency’s price north of $100,000.

(Sources: Bloomberg, NYT)

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