Bitcoin surged to a new all-time high Tuesday, surpassing $69,000 in the morning before fading below $63,000 by 5 p.m. ET. The cryptocurrency's recent rally, driven by excitement over bitcoin ETFs and the upcoming halving event, has risen from $25,000 over the past six months.

Analysts see this as a pivotal moment, highlighting bitcoin's resilience and its ability to bounce back despite challenges. However, skeptics warn of potential risks associated with the rapid price rise, urging caution among investors.

Bitcoin's price has soared by more than 20 percent this month and more than tripled since January last year
AFP

The recent surge in bitcoin's price marks a significant milestone, with the cryptocurrency reaching unprecedented levels fueled by various factors. The anticipation surrounding bitcoin ETFs, which began trading earlier this year, has contributed to the bullish sentiment, signaling growing institutional interest in digital assets. Additionally, the upcoming halving event, designed to create scarcity around bitcoin, has further fueled investor optimism.

Early bitcoin adopter and Galaxy Digital CEO Mike Novogratz posted on X ,"Hard to predict where we stop,". He also added, "Bitcoin is in price discovery phase. Maybe really for the first time since it's been an asset as now the bulk of U.S. wealth has easy access." Galaxy Digital, collaborating with asset management giant Invesco, is among the issuers of the 10 U.S.-based spot ETFs now available.

Analysts attribute bitcoin's resurgence to a combination of macroeconomic factors and regulatory changes that have enhanced its credibility as an asset class. The broader acceptance of bitcoin by institutional investors, coupled with favorable financing conditions and a favorable regulatory environment, has created a conducive environment for its growth.

The recent milestone represents a triumph for an industry plagued by reputational and regulatory challenges, particularly highlighted in the tumultuous year of 2022. During this period, crypto lenders faced scrutiny, and the collapse of the FTX exchange further exacerbated concerns. Since then, Bitcoin has persistently battled to affirm its legitimacy in the financial landscape. Moreover, this achievement could herald a resurgence of interest among retail investors in the crypto market, according to Needham analyst John Todaro.

However, U.S. spot bitcoin ETFs have conferred legitimacy upon the cryptocurrency and garnered significant popularity. BlackRock's iShares Bitcoin Trust (IBIT) recently surpassed $10 billion in assets under management, accentuating the widespread adoption of these investment vehicles.

This would signify the third bull run for bitcoin, according to Aurelie Barthere, an analyst with Nansen, the slowdown in Fed rate hikes likely contributed to BTC's bottoming in 2022 and subsequent rally in November 2023. Barthere also emphasized the positive impact of the Bitcoin Halving on crypto prices, supported by historical data showing increased returns during this period. Barthere noted that the robust performance of risk assets, including crypto, equities, and credit, indicates eased financing conditions and optimism about macro prospects, reducing uncertainty surrounding potential growth shocks.

Despite the positive outlook, concerns linger about the sustainability of bitcoin's rally and the potential for a sharp correction. Some experts caution that the market may be overheated, with prices reaching extreme levels, which could trigger a significant downturn. Moreover, the historical volatility of bitcoin underscores the inherent risks associated with investing in digital assets, highlighting the need for investors to exercise caution and diversify their portfolios. Looking ahead, the outlook for bitcoin remains uncertain, with conflicting views on its long-term prospects.

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