Bitcoin surged above $65,000 on Monday, reaching a two-year high and edging closer to its previous record levels, buoyed by a surge of investment inflows and growing institutional interest.
The cryptocurrency hit a session peak of $65,537 during European trading hours, following a similar trajectory in Asian markets where it had already marked a new two-year high.
At the time of writing, Bitcoin was trading at $65,045, representing a 4% increase for the day.
This remarkable rally comes amidst a backdrop of heightened investor enthusiasm, with Bitcoin recording a staggering 50% gain since the beginning of the year.
The recent surge has been particularly notable, occurring predominantly over the past few weeks, coinciding with a surge in inflows into U.S.-listed bitcoin funds.
The approval and subsequent launch of spot bitcoin exchange-traded funds (ETFs) in the United States earlier this year have played a pivotal role in driving this renewed interest.
These ETFs have provided an avenue for large institutional investors to gain exposure to Bitcoin, reinvigorating confidence and momentum reminiscent of the bull run witnessed in 2021.
Markus Thielen, head of research at crypto analytics firm 10x Research in Singapore, commented on the sustained inflows, stating, “The flows are not drying up as investors feel more confident the higher price appears to go.”
Data from LSEG indicates that net flows into the ten largest U.S. spot bitcoin funds totalled $2.17 billion in the week leading up to March 1, with a significant portion directed towards BlackRock’s iShares Bitcoin Trust.
The rally in Bitcoin has also spurred interest in other cryptocurrencies, with Ethereum (ETH) witnessing a notable uptick in value.
Speculation surrounding the potential approval of Ethereum ETFs has contributed to its recent surge, with the cryptocurrency up 50% year-to-date.
On Monday, Ethereum was trading at two-year highs, reaching $3,518, representing a 2.6% increase for the day.
The bullish sentiment in the cryptocurrency market has coincided with record-breaking performances in traditional stock indexes, such as Japan’s Nikkei.
Brent Donnelly, trader and president at analysis firm Spectra Markets, attributed Bitcoin’s positive trajectory to its status as a high-volatility tech proxy and liquidity gauge.
He remarked, “In a world where Nasdaq is making new all-time highs, crypto is going to perform well.”
However, while the recent surge in Bitcoin and other cryptocurrencies may evoke parallels with the exuberance witnessed in 2021, analysts remain cautious about the potential risks associated with such rapid price appreciation.
Regulatory scrutiny, market volatility, and the emergence of alternative investment opportunities could all pose challenges to the sustainability of the current rally.