The world’s largest cryptocurrency, Bitcoin, hit a new record high for a brief period this week after reaching $69,200.
It marks a new high for digital coin coin, just above the record $69,000 posted in November 2021.
The controversial cryptocurrency has made its comeback after plummeting to a low of around $16,400 following a boom during the coronavirus pandemic.
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It hit a high of $69,200 on Tuesday 5 March but has since fallen back to around $66,600.
Bitcoin is now up by more than 40% since the start of 2024 and has risen 165% in the 12 months to the end of February.
Currently, Bitcoin is trading around $62,732 - up by 21% since the start of the week.
Find out why the value of Bitcoin is rising and if you should invest in the digital currency - or even sell any holdings you have as prices rise. Bitcoin is a high-risk investment, it remains unregulated and highly volatile which means there can be quick and major changes in its price.
Why is Bitcoin rising?
Whilst regulatory clampdowns and high-profile cryptocurrency frauds have contributed to Bitcoin's declines in recent years, the digital coin has staged a recovery.
This has been helped by the Securities and Exchange Commission in the US approving Bitcoin-backed exchange traded funds (ETFs) in January.
Mona El Isa, chief executive of crypto asset management firm Avantgarde, says the approval of Bitcoin spot ETFs holds “immense significance for the cryptocurrency industry.”
She says it is already bringing substantial capital into the market as investors seek exposure to Bitcoin through a trusted and regulated vehicle.
“Unlike futures ETFs, which track Bitcoin's price through derivative contracts, the spot ETF directly hold the underlying asset,” she adds.
“This means it will create organic demand for Bitcoin itself, potentially driving up its value as more investors, including institutional allocators like BlackRock and Fidelity, seek to hold the asset within the ETF. This, in turn, could have a cascading effect, further solidifying Bitcoin's position in the global financial landscape."
Supporters are also anticipating a halving event in April, when miner rewards are cut in half and supply of the cryptocurrency drops. This usually pushes up the price before it falls again so investors may be looking to cash in and out quickly over the next few weeks.
“If the pace of Bitcoin issuance slows while demand either remains steady or increases, the effect on price can be substantial,” says Duncan Ash, head of product strategy at blockchain protection company Coincover,
“On 12 February alone, Bitcoin ETFs purchased ten times the amount of Bitcoin that miners were able to create in a day. The upcoming halving will reduce supply even further and historically, this has caused the price of Bitcoin to rise. If the next halving follows the same pattern, we can expect continued growth in Bitcoin’s price during the months ahead.”
Should I invest in Bitcoin?
Bitcoin rose to prominence during the pandemic, helped by high profile supporters such as Elon Musk as well as low interest rates and stock market uncertainty.
But Bitcoin and all cryptocurrencies are unregulated and can be subject to wild price swings and volatility as there are very few market fundamentals behind them beyond supply and demand and sentiment.
Laith Khalaf, head of investment analysis at AJ Bell, cautions that Bitcoin investors need to keep the ‘FOMO’ in check, especially when it comes to something as febrile as crypto.
"This might not be the top of the current bull market in Bitcoin, but anyone buying in should be willing to accept the potential downside, especially if the crypto market eventually proves to be the emperor’s new clothes," he says.
"The Bank of International Settlements estimates that around three quarters of Bitcoin buyers between 2015-2022 were likely to have lost money, despite a huge rise in the price of the cryptocurrency, almost certainly because they got sucked in at precisely the wrong time."
Khalaf says the recent surge in Bitcoin accompanies a broader rally in risk assets this year, particularly technology stocks such as Nvidia.
"In contrast to Bitcoin, Nvidia has actually posted impressive earnings growth, and so is a much safer bet, albeit coming at a premium valuation and with some speculative elements," he adds.
"Bitcoin doesn’t have any earnings and doesn’t pay an income, so price action is largely driven by sentiment. If you buy some, you’re relying on someone paying more than you further down the line to turn a profit.
"While that’s true of shares in companies too, earnings in the real economy provide an anchor for sentiment to coalesce around. Even with this stabilising force, equity markets can be choppy enough."
The Financial Conduct Authority (FCA) has warned that cryptocurrency investors should be prepared to lose all their money.
If you do want to buy or sell cryptocurrency, make sure you use a recognised trading platform.
While cryptocurrencies aren't regulated, platforms that let you buy and sell them should be approved for anti-money laundering purposes by the FCA and should appear on its register of cryptoasset firms.
