Daily Management Review

Bitcoin Regains Its $1 Trillion Crown Market Cap With Ease


Bitcoin Regains Its $1 Trillion Crown Market Cap With Ease
Bitcoin is soaring right now.
The largest cryptocurrency in the world has increased in value by 22% to $52,005 this year, surpassing the $1 trillion market cap for the first time since its historic peak in late 2021.
According to CoinGecko data, its comeback has energised the larger cryptocurrency market, which currently stands at over $2 trillion and includes ether and other digital coins.
The industry has benefited from U.S. regulatory approval of a number of spot bitcoin exchange-traded funds (ETFs), including those from Fidelity and BlackRock, that provide access to the cryptocurrency through traditional stock markets.
According to brokerage Bernstein, the U.S. spot ETFs gained 60,000 bitcoin in the first month of its inception, which is more than twice the amount of bitcoin mined in the same period.
"The amount of flows far outstrips anyone's expectation," said Mark Connors, head of research at Canada's 3iQ Corp.
Volumes of crypto trading are likewise strong.
According to a survey by London-based researcher CCData, spot trade volumes on centralised exchanges increased 4.4% to $1.4 trillion in January, marking the highest number since June 2022 and the fourth consecutive month of gain.
The biggest public cryptocurrency exchange, Coinbase Global, posted its first quarterly profit in two years last week because to the renewed interest.
"The bitcoin appreciation is contributing to better spot bitcoin ETF flows, which is in turn driving bitcoin prices higher, and pulling other tokens higher as well," J.P.Morgan analysts said.
Several industry observers state that things are looking up, as investors are purchasing bitcoin in advance of the blockchain's scheduled "halving" event, which is scheduled for April and decreases mining earnings by half every four years.
According to Bernstein analyst Gautam Chhugani, 2024 will be a historic year for cryptocurrencies, with bitcoin reaching all-time highs and reaching a peak of $150,000 by mid-2025.
"This optimistic outlook is bolstered by the expectation of an upcoming halving event and the possibility of interest-rate reductions," analysts at CCData stated.
Bitcoin reached an all-time high last week of 7,919,000 yen against the Japanese yen, while it is still 32% behind its peak of $69,000.
Not everything in crypto is high fives: There are indications that investors driven by FOMO are driving the market.
The Crypto dread & Greed Index from CoinGlass, which runs from zero to 100—where zero means "extreme fear" and 100 means "extreme greed"—was at 72. Typically, excessive greed on the part of investors indicates that a market correction is overdue.
Persistently high interest rates could pose a danger to riskier assets like bitcoin; traders have retracted predictions of a rate cut to June from March after a run of positive U.S. economic data.
"While we remain bullish with liquidity rushing back into risk assets, inflation being sticky over 3% remains a downside risk and would also mean increased volatility across markets," analysts at crypto trading firm QCP Markets said.