Bitcoin hit a record high of more than $69,000 on Tuesday, capping a dramatic comeback for the volatile cryptocurrency after its value plummeted in 2022 amid a market slump.
Bitcoin’s price has risen more than 300 percent since November 2022, a revival few predicted when the price dipped below $20,000 that year. Its previous record was just under $68,790 in November 2021, as crypto markets boomed and amateur investors poured savings into experimental digital coins.
The cryptocurrency has been “pronounced dead for the 150th time,” said Cory Klippsten, the chief executive of Swan, a financial services firm focused on Bitcoin. “And Bitcoin continues to do what Bitcoin does, winning people over as they take the time to actually learn about it.”
Bitcoin’s recent surge has been driven by investor enthusiasm for a new financial product tied to the digital coin. In January, US regulators allowed a group of crypto companies and traditional financial firms to offer exchange-traded funds, or ETFs, that track the price of Bitcoin. Funds provide a simple way for people to invest in crypto markets without directly owning the virtual currency.
Last week, investors poured more than $7 billion into investment products, driving Bitcoin’s rapid rise, according to Bloomberg Intelligence.
The price of Ether, the second most valuable digital currency after Bitcoin, has also risen more than 50 percent this year, reaching around $3,800. Its rise was partly driven by enthusiasm over the prospect that regulators might also approve an ETF tied to Ether.
But cryptocurrencies remain volatile. Within minutes of hitting the record, Bitcoin’s price dropped to around $67,500.
And despite the euphoria, the crypto industry is still navigating the legal aftermath of the 2022 crash. Sam Bankman-Fried, the disgraced founder of the collapsed FTX crypto exchange, is set to be sentenced to prison at the end of this month. The Securities and Exchange Commission has sued several prominent crypto firms, including US exchange Coinbase, arguing that the companies are offering unregistered securities.
Courts have begun weighing some of those lawsuits, and the outcome could determine whether crypto companies can continue to operate in the United States. Many skeptics remain unconvinced that digital currencies offer much real-world utility.
“There is no inherent value,” said John Reed Stark, a former SEC official and an outspoken critic of the crypto industry. “There is no proven track record of adoption or reliance.”
Bitcoin was invented after the 2008 financial crisis by a mysterious developer using the pseudonym Satoshi Nakamoto. The digital coin was originally envisioned as a decentralized alternative to the traditional financial system, a way for people to exchange funds without relying on banks or other intermediaries.
But as Bitcoin rose in value, it became a vehicle for financial speculation. The price of the currency rose quickly, before falling just as quickly — mining new millionaires one day and erasing their savings the next.
Early in the pandemic, the rise of day trading by amateur investors helped make cryptocurrencies a hot commodity. The industry promoted itself with splashy magazine spreads and Super Bowl commercials, sending the price of Bitcoin soaring.
Within a year, the bubble burst. A series of corporate implosions culminated in November 2022 with the collapse of FTX, Mr. Bankman-Fried. Investors lost billions of dollars, as the price of Bitcoin fell to around $16,000.
The industry’s fortunes began to improve in August, when a federal appeals court cleared the way for companies to offer ETFs tied to Bitcoin. An ETF is essentially a basket of assets broken down into shares. Investors buy shares in the basket, rather than owning the assets directly.
In the crypto world, that means investors can gain exposure to Bitcoin without mastering the technical details of a digital currency wallet, or entrusting large sums of money to fly-by-night companies with checkered legal history. Financial giants like BlackRock and Fidelity offer investment products in Bitcoin, providing a measure of stability in a volatile industry.
For years, crypto advocates have predicted that the approval of Bitcoin ETFs will bring billions of dollars in new investment to the industry, though some analysts have expressed skepticism about the projections. that.
Early data suggest the impact is substantial. In recent months, the approval of investment vehicles combined with other factors to increase the price of Bitcoin.
“Every time you’re in despair, it looks like crypto and Bitcoin aren’t going to come back,” said John Todaro, a Needham analyst who tracks the crypto industry. “But we’ve seen time and time again that it keeps moving forward.”
Later this year, the amount of new Bitcoin going into circulation will decrease due to an event known as “the division.” The event, programmed into Bitcoin’s underlying code, will halve the amount of Bitcoin people receive when they run software to validate crypto transactions (a process commonly known as “mining”). .
The prospect of a smaller supply of Bitcoin has helped drive its price higher this year, some analysts say. And with the split expected to take place in the spring, Bitcoin proponents predict that prices will continue to rise.
“This is just the beginning of this bull market,” said Nathan McCauley, the chief executive of crypto company Anchorage Digital, because prices are rising this month. “The best is yet to come.”
