For the past year, Bitcoin has been on a steady upward trajectory. The failures of centralized service providers such as FTX, Celsius, and others have been left behind by the industry. Some of the world's largest financial institutions have stepped in to fill the void. As a result, the price of Bitcoin doubled in a matter of months, surpassing its all-time high.
Today, for the first time, Bitcoin surpassed its all-time high of $70,000 for more than a few minutes. This milestone underscores the continued relevance and growing confidence in the cryptocurrency. However, the latest surge is not only a continuation of the upward trend, but also a reinforcement of the case for Bitcoin as a permanent fixture in the global financial landscape.
Subscribe to our newsletter
The best articles of the week, directly delivered into your mailbox.
Institutional FOMO sets in
For six months, various product providers sought approval for the first spot-based Bitcoin ETFs. Financial giants such as BlackRock, Fidelity and others submitted dozens of regulatory filings to the U.S. Securities and Exchange Commission (SEC). Finally, on January 10, the SEC gave the green light. The products shattered ETF records with $4.6 billion in first-day trading. Two months later, net inflows are close to $10 billion. On average, more than $239 million per day flowed into Bitcoin ETFs, despite billion-dollar selling pressure from insolvent players.
Spot Bitcoin ETF Breakdown / Source: Farside Investors
There's a palpable fear of missing out (FOMO) on Wall Street. It's not just individual clients of the world's largest financial institutions who want to invest in Bitcoin through ETFs. The big banks themselves will soon be adding the asset class to their funds. Morgan Stanley and BlackRock have already filed with the SEC to do so. The sheer volume of products is accelerating this trend. BlackRock's IBIT is consistently among the top 10 ETFs by trading volume. The pressure on other financial institutions is growing dramatically.
A safe haven in an uncertain world
The value of cryptocurrencies is based on a fixed monetary policy. Similar to physical gold, there's only a limited number of Bitcoin in the world: 21 million. No central bank can artificially create new supply. The mining process creates only 900 new Bitcoins per day, which requires significant energy to support the network. Currently, this results in an annual inflation rate of about 1.7%. By comparison, the supply of gold will increase by 3% in 2023, while many Western currencies are experiencing higher inflation.
In addition, every four years there's a halving of Bitcoin inflation. As a result, the number of newly created Bitcoins decreases exponentially until the fixed maximum of 21 million is reached. With an average block time of 10 minutes, this is expected to happen in 2140. The next Bitcoin halving is scheduled for April 2024. Therefore, extraordinary demand is meeting a diminishing supply, which is reflected in the price of the cryptocurrency. Today, Bitcoin has once again surpassed its all-time high.
Bitcoin BTC/USD (weekly) / Chart: Trading View
In terms of price action, Bitcoin's current rally is very similar to the one that took place after the Covid crash in 2020. Most indicators point to overheating, but strong demand does not allow for deep corrections. Predicting future price movements would require a crystal ball. However, one thing has always been true in past market cycles: a new all-time high in Bitcoin is likely just the beginning. Alternative cryptocurrencies ("altcoins") are still over 30% away from their old highs.
