Bitcoin hits all-time high of $69,170, then loses 10% in a day

Bitcoin, the world’s largest cryptocurrency, reached a new all-time high of around $69,170 on Tuesday, breaking its previous record set in December 2021. However, the rally was short-lived, as bitcoin plunged more than 10% later in the day, wiping out billions of dollars in market value.

The volatile price movement came amid a surge of interest in the crypto space, following the approval of the first bitcoin exchange-traded fund (ETF) in the US last week. The ETF, which tracks the performance of bitcoin futures contracts, attracted more than $1 billion in assets under management in its first two days of trading.

BTC/USDT 4 hour chart on Binance | Source: TradingView

Many analysts and investors see the ETF as a sign of mainstream acceptance and institutional adoption of bitcoin, which could boost its long-term value and stability. However, some also warn that the ETF could introduce more short-term speculation and risk, as well as regulatory uncertainty.

“If previous non-crypto-related ETFs can teach us anything, it is that real growth after an ETF approval can be a multi-year process,” Chainlink co-founder Sergey Nazarov told Blockworks. “After waiting almost a decade for this ETF, I’d be surprised if this core group of holders would choose to relinquish their coins right as Wall Street finally decides to legitimize the space.”

Ether, the second-largest cryptocurrency by market capitalization, also experienced a sharp rise and fall on Tuesday, reaching an intraday high of around $3,816, about 22% below its all-time high set in November 2021. Ether then dropped as much as 10% to trade around $3,500.

“Active trader positioning in bitcoin now appears fairly long,” Zach Pandl, head of research at Grayscale, said. “Valuations for ether and most other tokens remain below their highs from the previous crypto cycle.” Grayscale is the largest digital asset manager in the world, with more than $50 billion in assets under management.

While most analysts agree that a mild dip is expected after a peak, some also point to other factors that could support a sustained rally for bitcoin in the coming months. These include the upcoming halving cycle, which will reduce the supply of new bitcoins by 50% in May 2024, and the ongoing elevated interest rates in the US, which could increase the demand for alternative assets.

In addition, some data suggest that long-term holders of bitcoin are not selling their coins, but rather accumulating more. According to CryptoQuant, a blockchain analytics firm, a substantial distribution trend of long-term holders (LTHs) that had held BTC for more than six months was observed over the course of two days starting from March 4, when BTC exceeded $63,000.

Source: CryptoQuant

The Binary Coin Days Destroyed (CDD) indicator, which measures the amount of long-held BTC that is being spent, has also been active for the past two days, indicating that long-held BTC is being consumed above average.

Over 4,000 BTC were consumed each across the six-month to five-year cohort over two days, a similar trend to the end of February, about a week ago. What is noteworthy is, the consumption scale of the six-month to 12-month cohort is recorded at approximately 18,000. (The two-year to three-year cohort was excluded as there was no characteristic movement)

“Just as it rose from $61,000 to $68,000 after the LTH distribution at the end of February, can we expect another rally after this distribution?” CryptoQuant asked in a blog post.

However, not everyone is bullish on bitcoin’s prospects. Some critics argue that bitcoin is a speculative bubble that has no intrinsic value and is prone to manipulation and fraud. They also cite the environmental and social costs of bitcoin mining, which consumes huge amounts of electricity and generates carbon emissions.

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