LONDON (Reuters) – Bitcoin on the verge of an all-time high, its latest rally fueled by the launch of the first U.S. bitcoin futures exchange-traded fund that investors believe could make cryptocurrency accessible to many new investors.
But the advent of cryptocurrency ETFs in the world’s largest economy was not the only driving force behind this chapter of Bitcoin’s 2021 roller coaster. Here are some charts that examine the dynamics of its push to an all-time high.
Bitcoin is known for its wild price swings, its 13-year history of dizzying rises and equally steep drops.
His performance this fall was no different. The world’s largest cryptocurrency has climbed more than 60% since mid-September, gaining more than 46% in October alone.
Yet he’s also had some spectacular dives this year. After hitting its current high of $ 64,895 in mid-April, bitcoin has fallen by more than half in just 35 days, with a Chinese crackdown on cryptocurrencies among the factors.
One of the main reasons for its rally in recent weeks, analysts said, was the bet that U.S. regulators clearing the first bitcoin futures ETF would pave the way for more investment by retail and institutional investors.
Tony Sycamore of City Index said that these products âwill open up bitcoin exposure to a large segment of investors who have brokerage accounts and are comfortable buying stocks and ETFs, but do not wish to go through them. hassle and learning curve of setting up another account. with a cryptocurrency provider “.
Graphic: Riding the Roller Coaster: The Latest Bitcoin Rally: https://fingfx.thomsonreuters.com/gfx/mkt/akvezanqnpr/Pasted%20image%201634648334016.png
Yet even before the launch of the new ETF, inflows into existing bitcoin exchange-traded funds and products were increasing sharply.
Average weekly flows to bitcoin funds totaled $ 121.1 million in October, up from $ 31.2 million a month earlier, according to data from London-based CryptoCompare. They had fallen into negative territory over the previous three months, with the exits following bitcoin’s steep losses in May and June.
âWe had a pretty big sell-off for bitcoin over the summer. Price action was a rally from a trough,â said Sui Chung, CEO of CF Benchmarks, a crypto index provider.
“Bitcoin was just seen as cheap – anything under $ 30,000 attracted a lot of investors, especially institutional ones.”
Graphic: Money is flowing back to bitcoin funds: https://fingfx.thomsonreuters.com/gfx/mkt/lbvgnowgmpq/Pasted%20image%201634648555312.png
With inflation rising in many large economies, investors are increasingly betting that the big central banks will raise their rates accordingly. Against this backdrop, according to some market participants, bitcoin’s alleged anti-inflationary qualities have also led to recent gains.
Since the beginning of July, bitcoin has gained nearly 85%. Some inflation-hedging assets did better, with inflation-linked bonds – the US TIPS index – gaining over 140%. Gold is flat over the same period.
âWe could see higher interest rates straining global stock markets,â Joel Kruger told crypto exchange LMAX Digital. “Bitcoin will be very well supported on this longer term store value proposition and on this inflation hedge proposal.”
Chart: Bitcoin vs inflation hedges: https://fingfx.thomsonreuters.com/gfx/mkt/jnvwewlyavw/Pasted%20image%201634648188203.png
(Reporting by Tom Wilson; Editing by Rachel Armstrong and Alex Richardson)
Copyright 2021 Thomson Reuters.