Bitcoin is experiencing a rapid resurgence, climbing 8% to $67,310, well above its $44,000 valuation at the start of the year and less than $2,000 away from surpassing its November 2021 record high of around $69,000. This rally is partly due to demand for spot bitcoin exchange-traded funds (ETFs), which allow investors to dabble in crypto in a less riskier way than ever before. The ETFs have attracted an enormous influx of cash this year, as investors are getting turned on to the fact that bitcoin can be treated as an uncorrelated asset, making it extremely attractive for portfolio diversification. Spot bitcoin ETFs allow investors to gain direct exposure to bitcoin without holding it.
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 U.S. Securities and Exchange Commission approved the sale of spot bitcoin ETFs in January, and since then, investors have deposited some $7.35 billion into the 11 different funds available. 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 2023, with its price soaring to a 19-month high in December to about $41,000.
Analysts at the time credited the surge to three main factors: anticipation of the SEC’s approval of the spot ETFs, anticipation of Fed rate cuts, and its upcoming halving event, in which the reward for mining bitcoin is cut in half. Bitcoin’s total market capitalization stood at $1.29 trillion on Monday, more than three times higher than the $320 billion market cap it had at the end of 2022 during the crypto winter. However, the crypto market’s total market cap of $2.55 trillion is well short of the record high of over $3 trillion hit in late 2021.
The 11 spot bitcoin ETFs hitting the market in January have enabled investors a lower-fee, easier-access way to put their money into bitcoin. Last week, BlackRock’s fund became the fastest ETF in history to reach $10 billion in assets under management. Publicly traded stocks closely tied to bitcoin have outperformed the broader market this year, with shares of crypto exchange Coinbase, leading bitcoin miner Marathon Digital, and bitcoin investor MicroStrategy each hitting multiyear highs this year.