Bitcoin reaches new record high, tops $69,000 as investors cheer ETFs, rate prospects

Bitcoin soared to a new record high on Tuesday, fuelled by investors pouring money into USspot exchange-traded crypto products and the prospect that global interest rates may fall.

The world's largest cryptocurrency hit a high of $69,202, topping November 2021's all-time peak of $68,999.99. Investor interest has increased since the Securities and Exchange Commission approved 11 spot bitcoin ETFs in late January. It then traded lower and was last at $65,792.

“The bitcoin all-time high marks a turning point for crypto," said Nathan McCauley, CEO and co-founder of crypto platform Anchorage Digital. "Traditional institutions were once sitting out; today, they are here in full force as the principal drivers of the crypto bull market."

Bitcoin's meteoric nearly 160 per centascent since October, of which 44 per centcame in February alone, marks a sharp contrast to 2022, when the market was beaten into an 18-month-long crypto winter, plagued by a string of high-profile corporate bankruptcies and scandal.

Net flows into the 10 largest U.S. spot bitcoin funds reached $2.2 billion in the week ended March 1, with more than $2 billion of that going into BlackRock's iShares Bitcoin Trust, according to LSEG data.

"We've been fielding more questions from the field on bitcoin, especially now that there are more efficient and cheaper ways to own bitcoin after the recent slew of ETF launches," said David Wagner, a portfolio manager at Aptus Capital Advisors.

RISK ON

In addition to demand from a wider pool of investors,bitcoin, and crypto generally, has gotten a boost from the prospect of the Federal Reserve cutting U.S. interest rates, which often prompts investors to divert capital into assets that are higher yielding or more volatile.

“One part of (bitcoin's rally) has to do with the generally positive sentiment on risk in general," said Alvin Tan, head of Asia FX strategy at RBC Capital Markets. "You can see that in the all-time high in the S&P 500 and Nasdaq."

Investors have lapped up crypto, mega-cap technology stocks and investment-grade corporate bonds in particular this year.

Also on Tuesday, gold struck a record high, moving further above $2,100 per ounce in a rally sparked by growing bets for a USinterest rate cut in June.

"(Cryptocurrencies) are now being used as an alternative to using gold when markets are looking to hedging against increased risks, higher interest rates," said Stuart Cole, chief economist at Equiti Capital. "So no surprise I think that when you see the gold price rallying, cryptos are doing the same.”

Analysts saybitcoinalso benefited ahead of April's so-called halving event - a process that takes place every four years in which the rate at which tokens are released is cut in half, along with the rewards given to miners.

Supply ofbitcoinis limited to 21 million, of which 19 million have already been mined.

Despite its recent popularity, for many investors,bitcoinis simply too volatile and lacks enough real-world applications to be anything other than a speculative asset.

Yet, in addition to the cocktail of flows of money into ETFs, the prospect of constrainedbitcoinsupply and an eventual decline in U.S. interest rates, some companies are adding crypto to their corporate coffers.

In February, software firm MicroStrategy - a long time holder ofbitcoin- said it had recently bought about 3,000 morebitcoins for $155 million, while social media platform Reddit also said in a regulatory filing it had bought small amounts ofbitcoinand ether.

On Monday, the number of dollar-pegged stablecoins issued by Tether crossed $100 billion for the first time. Tether issues a stablecoin that is designed to maintain a constant value of $1 and is widely used as a way of moving money in cryptocurrency without being exposed to price swings in other tokens such asbitcoinand ether.

The price of ether, the world's second largest cryptocurrency was last trading at $3,706, well below its record high of $4,867 that it touched in November 2021.

"Active trader positioning inbitcoinnow appears fairly long. Valuations for ether and most other tokens remain below their highs from the previous crypto cycle," said Zach Pandl, head of research at Grayscale Investments.

Crypto stocks were trading lower on Tuesday, with shares in Coinbase down 2.5 per centand shares in crypto miners Riot Platforms and Marathon Digital down 9.7 per centand 11.1 per cent, respectively.