Bitcoin hits record high. Here's what's driving up the price.
The price of bitcoin has reached a record high, continuing its rapid resurgence that began in late 2023.
The digital token rose to $68,818 early Tuesday morning, well above its $44,000 valuation at the start of the year. Bitcoin's rapid rise has also helped push up the price of ether, Solana and other popular cryptocurrencies this week.
What's fueling the rally? Cryptocurrency watchers say bitcoin is soaring in part because demand is rising on so-called spot bitcoin exchange traded funds. The ETFs, which allow investors to dabble in crypto in a less riskier way than ever before, has attracted a huge influx of cash this year, experts said.
"Investors are getting turned on to the fact that bitcoin can be treated as an uncorrelated asset, which makes it extremely attractive for portfolio diversification," Joel Kruger, a market strategist at digital currencies exchange LMAX Group, told CBS MoneyWatch.
A spot bitcoin ETF allows investors to gain direct exposure to bitcoin without holding it. Unlike regular bitcoin ETFs, in which bitcoin futures contracts are the underlying asset, bitcoins are the underlying asset of a spot bitcoin ETF. Each spot bitcoin ETF is managed by a firm that issues shares of its own bitcoin holdings purchased through other holders or through an authorized cryptocurrency exchange. The shares are listed on a traditional stock exchange.
The U.S. Securities and Exchange Commission approved the sale of spot bitcoin ETFs in January. Since then, investors have deposited some $7.35 billion into the 11 different funds available, reported Bloomberg. Some of the world's largest institutional investors, including BlackRock and Fidelity Investments, now offer spot bitcoin ETFs.
Bitcoin's price rally began months before in 2023: Its price soared to a 19-month high in December to about $41,000. Analysts at the time credited the surge to three main factors, including anticipation of the SEC's approval of the spot ETFs, anticipation of Fed rate cuts in 2024 and the crypto token's upcoming halving event, in which the reward for mining bitcoin is cut in half.
To be sure, bitcoin's ongoing price surge doesn't make the cryptocurrency any less volatile, as Laila Maidan, investing correspondent at Insider, told CBS News in December, when the cryptocurrency broke $41,000, which was its highest value in 19 months at the time.
"It doesn't mean the crypto is going to skyrocket and stay high," Maidan said. "It's still volatile and there's a lot of people who will always trade it."
Still, bitcoin's resurgence comes as welcome news to crypto investors, many of whom saw their assets plummet in value in 2022 after the collapse of FTX and other crypto exchanges. As the world's largest cryptocurrency, both in terms of trading volume and most mined, bitcoin is often looked to by financial analysts as a gauge of the overall health of the crypto industry.