Bitcoin prices near record high. Here's why.
Bitcoin is on a vertical tear, continuing its rapid resurgence and getting close to breaking its all-time high.
Rising Demand for Spot Bitcoin ETFs
Cryptocurrency watchers say bitcoin is soaring in part because demand is rising on so-called spot bitcoin exchange traded funds.
The ETFs, which allow investors to dabble in crypto in a less riskier way than ever before, has attracted an huge influx of cash this year, experts said.
Investors are getting turned on to the fact that bitcoin can be treated as an uncorrelated asset, which makes it extremely attractive for portfolio diversification.
Spot Bitcoin ETFs Explained
A spot bitcoin ETF allows investors to gain direct exposure to bitcoin without holding it.
Unlike regular bitcoin ETFs, in which bitcoin futures contracts are the underlying asset, bitcoins are the underlying asset of a spot bitcoin ETF.
Each spot bitcoin ETF is managed by a firm that issues shares of its own bitcoin holdings purchased through other holders or through an authorized cryptocurrency exchange. The shares are listed on a traditional stock exchange.
Institutional Investors and Bitcoin's Price Rally
The U.S. Securities and Exchange Commission approved the sale of spot bitcoin ETFs in January. Since then, investors have deposited some $7.35 billion into the 11 different funds available, reported Bloomberg on Monday.
Some of the world's largest institutional investors, including BlackRock and Fidelity Investments, now offer spot bitcoin ETFs.
Bitcoin's price rally began months before in 2023 and was fueled by factors such as anticipation of the SEC's approval of the spot ETFs, anticipation of Fed rate cuts, and its upcoming halving event.
Bitcoin's Volatility and Impact on the Crypto Industry
Bitcoin's ongoing price surge doesn't make the cryptocurrency any less volatile.
It's still volatile and there's a lot of people who will always trade it.
However, bitcoin's resurgence comes as welcome news to crypto investors, as it is often looked to as a gauge of the overall health of the crypto industry.
