Bitcoin reclaims $1 trillion market cap for first time since November 2021

Bitcoin has more than tripled in value since January 2023 (Photo: Bloomberg)

Bitcoin on Wednesday reclaimed the market cap of $1 trillion after rising 3 per cent to over $51,200. In the last seven days, Bitcoin has jumped 19.5 per cent, according to CoinMarketCap. It last traded at this level in November 2021.

Earlier this month, the largest crypto token by market cap crossed the $50,000 mark after over two years, in a comeback from scandals and wipeouts that cast a shadow on the industry.

The token has more than tripled in value since January 2023. However, it continues to be far below its peak of $69,000 achieved in November 2021.

Why is Bitcoin rallying?

The main reason for the surge, according to experts, is the approval and subsequent listing of Bitcoin spot exchange-traded funds (ETFs) in the US on January 11.

Nine such ETFs debuted, and more than decade-old Grayscale Bitcoin Trust converted into an ETF on the same day. The accessibility of ETFs promises to widen the investor base for the token. The new funds have attracted about $9 billion so far, according to Bloomberg.

“From January 1 to January 10, Bitcoin trading volumes grew from $16 billion to $50 billion – a 300 per cent increase. This is the impact of the approved Bitcoin ETF,” said Ryan Lee, chief analyst at Bitget Research.

Another reason which has led to the surge is the anticipation of Bitcoin halving. It is scheduled to take place in April this year. Bitcoin halving cuts the quantity of Bitcoin that miners receive for operating the powerful computers that verify transactions on the blockchain. It is often viewed as support for prices based on historical precedent.

According to Lee, the first halving occurred in November 2012. Within one year, the price of Bitcoin rose from $13 to $1,152 and reached its peak one year and one month after the halving.

The second halving occurred in July 2016, when the price of Bitcoin rose from $664 to $17,760, reaching its peak one year and five months after the halving.

The third halving occurred in May 2020, when the price of Bitcoin rose from a high of $9,734 to $67,549 (April-November 2021), reaching its peak one year and six months after the halving.

Now, the fourth halving will take place in the next 63 days.

With rate cuts by the US Fed anticipated in the same months, Shivam Thakral, chief executive officer at BuyUcoin, said halving may push the market to rise to a previous all-time high.

“The macro factors such as the anticipated rate cut by the US Fed and the growing popularity of Bitcoin ETFs will drive the market in the mid to long term. We can expect Bitcoin to retest its all-time high of $69,000 post-halving,” he said.

“If this increased demand continues the Bitcoin halving could mark the beginning of a new bull run for digital assets pushing Bitcoin beyond any historic all-time highs,” added Manhar Garegrat, country head- India & Global Partnerships at Liminal Custody Solutions.

First Published: Feb 14 2024 | 5:23 PM IST

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