Bitcoin surges past $59,000 as ETFs and halving fuel demand

Bitcoin, the world’s largest cryptocurrency by market capitalization, soared above the $59,000 mark on Wednesday, reaching its highest level since November 2021. The digital asset gained 5% in the past 24 hours, adding over $50 billion to its value and surpassing $1.2 trillion in market cap.

The rally was driven by a surge in demand for spot bitcoin exchange-traded funds (ETFs), which allow investors to gain exposure to the cryptocurrency without holding it directly. According to data from CryptoCompare, spot bitcoin ETFs recorded over $3 billion in cumulative trading volumes on Tuesday, the highest since their launch in October 2021.

BTC/USDT 1 hour-chart on Binance | Source: TradingView

Some traders also attributed the price spike to the upcoming bitcoin halving event, which is expected to take place in April 2024. The halving is a process that reduces the amount of new bitcoins created every 10 minutes by half, making the supply of the cryptocurrency more scarce and potentially increasing its value. Historically, bitcoin has experienced significant price increases in the months leading up to and following the halving.

Another factor that may have contributed to the rally was the liquidation of bearish bets on bitcoin futures, which are contracts that allow traders to speculate on the future price of the cryptocurrency. According to data from Coinglass, futures bets on lower bitcoin prices took on $25 million in liquidations since Asian morning hours, indicating that some traders were forced to close their positions as the price rose.

Bitcoin was not the only cryptocurrency that enjoyed gains on Wednesday. Other major tokens such as ether (ETH), the native currency of the Ethereum network, Solana’s SOL, a fast-growing blockchain platform, and XRP, the digital asset of the Ripple network, also increased by as much as 3% since Asian morning hours, according to data from CoinGecko.

However, not everyone was optimistic about the crypto market’s performance. The fear and greed index, a sentiment metric that tracks the rate of change in asset movement against inherent fundamentals, flashed 82 on Wednesday, implying extreme greed and reaching the highest such level in over a year. The index is rated on a scale of 0-100, with 0 being the most fearful and 100 being the most greedy. A greedy environment is considered a sign of euphoria, which “means the market is due for a correction,” the index’s developers say.

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