On Monday, Bitcoin reached an all-time high, surpassing $71,000, signaling a continued upward trend in the leading cryptocurrency’s value. The virtual currency exceeded the previous peak in November 2021, driven by heightened trading accessibility and a weakened US dollar. Investors were also attentive to an upcoming industry event known for historically enhancing the value of Bitcoin.
Britain’s financial watchdog on Monday became the latest regulator to pave the way for digital asset trading products. It said it will now permit recognized investment exchanges to launch crypto-backed exchange-traded notes (ETNs). These ETNs are like funds that track the prices of assets or indices and allow investors to take positions on the market without owning the underlying asset directly.
The move opens the door to bitcoin ETNs, which are likely to draw in big institutional money that has shunned the volatile digital coin. However, the FCA cautioned that such products only suit professional investors who know and understand their risks.
“Our rules give people time to consider whether this is the right choice for them, and we have clear warnings that they could lose all of their money,” said Sheldon Mills, the FCA’s consumers and competition director. “Research shows that many people regret making hasty decisions about putting their money into crypto, and our rules will help prevent them from doing that again.”
Asked why bitcoin is rising so quickly, Trenchev said: “It’s a combination of factors. There’s a flow of money into ETFs, the London Stock Exchange just announced it will accept applications for bitcoin and ether ETNs, and there’s a demand frenzy in Asia.”
However, analysts warned that even with a rally that has lifted the annualized three-month futures premium on significant exchanges to above 25%, the speculative rally has little real-world application. Some traders say that the rise is a bubble that could burst at any moment.
Aside from the hopes for significant gains, some are buying into Bitcoin to avoid a potential US Federal Reserve rate increase this month that would raise interest rates and make it more expensive to hold dollars. Others are betting that the crypto will become a legitimate store of value.
The price surge is accelerating ahead of an April event that will cut the number of new bitcoins that can be mined in half, effectively increasing its value because the supply is finite by design. The event is known as the halving and is intended to keep the number of bitcoins in circulation below 21 million, a critical step in making it a more reliable store of value. The halving typically boosts the price of bitcoin, but the latest jump was more extreme than usual.
