Bitcoin soars above $60K as spot ETFs drive trending frenzy, lead to Coinbase crash
By: Thomas B.
Bitcoin blew past $60,000 for the first time in more than two years on Wednesday as the popularity of spot ETFs drove a renewed trading frenzy for volatile cryptocurrencies – and crashed popular crypto exchange Coinbase.
The price of bitcoin soared to nearly $64,000 in the early afternoon, nearing it’s all-time high of $$68,789 in November 2021, before falling to around $61,000 by 6 p.m. That marked an 18% increase in the leading digital currency compared to one week ago and 40% bump compared to a month ago.
In the midst of Wednesday’s rally, Coinbase, one of the largest digital asset exchanges, warned users that its website was experiencing issues – but assured customers that their “assets are safe” after several complained that their digital wallets showed “$0.00.”
“We are dealing with a large surge of traffic – apologies for any issues you encounter,” Coinbase CEO Brian Armstrong posted on X.
The bullish run on the world’s most popular crypto token could be the start of what Split Capital’s Zaheer Ebtikar called “a pretty clear FOMO kind of rally,” referring to the “fear of missing out.”
“More and more people are just convinced to buy,” Ebkitar told Bloomberg.
The massive early success of recently approved spot bitcoin ETFs – which allow investors to acquire stakes in funds that own bitcoin offered by Blackrock, Fidelity and other firms – has played a key role in the surge, experts told.
The boom drove $520 million into BlackRock’s Bitcoin ETF, a one-day record.
“I do think the fact this is happening concurrent with the ETFs – and you can look at the inflows of those things – that seems to be a pretty big driver for this [rally],” said Colin Harper, head of research at the bitcoin mining software firm Luxor.
“There’s a large segment of the population that sees regulatory approval as, ‘well, the state’s okay with this, they’re not going to ban it, institutions are cleared now.’.. “There’s a lot more legitimacy to it for the average person,” Harper added.
However, other market experts warned that investors may soon see a “sharp correction” of 20% or more.
“This move has been very sharp, leverage is very high at the moment,” AnB Investments’ Jaime Baeza Baeza told Bloomberg.
The overall market capitalization for the cryptocurrency market hovered at a whopping $2.31 trillion as of Wednesday afternoon – after crossing the $2 trillion threshold earlier this month for the first time in two years.
Cryptocurrencies have re-emerged as a hot asset alongside other trendy bets such as AI chipmaker Nvidia and weight-loss drug maker Eli Lilly, according to Jake Dollarhide, CEO of Longbow Asset Management.
“You have the additional momentum of it being legitimatized by the SEC approving the ETFs from Blackrock and others. And then, frankly, the trash was hauled off to the curb in the form of Binance and FTX,” Dollarhide said. “You get rid of some bad actors and you rebuild trust within the crypto space.”
The latest rally in bitcoin’s price brought it within striking distance of its all-time high of $69,000 – a number that seemed unattainable over the last two years as a so-called “crypto winter” crushed demand for cryptocurrencies.
Bitcoin’s struggles throughout 2021 and 2022 were compounded by a number of scandals, including the collapse of convicted crypto fraudster Sam Bankman-Fried’s FTX empire.
Other bullish factors include investor optimism that the Federal Reserve will cut sky-high interest rates at some point this year as well as a looming bitcoin “halving”- a pre-planned event due in April that reduces the amount of digital currency people receive for “mining” by half.
Bitcoin’s “halvings” are meant to ensure the currency’s scarcity over time. While the exact impact of each halving on bitcoin’s value is up for debate among experts, the price of bitcoin has soared ahead of past halvings that occurred in 2020, 2016 and 2012.
“As the halving approaches, supply of new coins will be cut in half while demand is buoyed by the ETFs,” said Christopher Alexander, chief analytics officer at Pioneer Development Group.
“Once the small retail investors fully regain confidence in crypto exchanges there will be demand pressure at a level that has never been seen before,” Alexander added.
