At the heart of the rally that is pushing bitcoin toward a record high is a simple tenet of economics: supply and demand.
The surge in demand for the cryptocurrency that’s resulting from new exchange-traded funds is vastly outstripping the supply of new tokens being created in the mining process, as well as the bitcoin that long-time holders are willing to sell. That’s what lit the match that has set the crypto market on fire, with fuel being added from traders chasing the upward momentum and loading up on leveraged bets that the surge will continue.
Bitcoin pushed past $60,000 for the first time in more than two years on Wednesday and has jumped about 40% already this year, triggered mostly by the successful launch of US exchange-traded funds holding the coins which have attracted more than $6 billion since they began trading Jan. 11. Bitcoin last traded at $60,000 in November 2021, after reaching an all-time high of almost $69,000 earlier that same month.
“It’s pretty nuts,” said Ryan Kim, head of derivatives at digital-asset prime brokerage FalconX.
An upcoming reduction in bitcoin’s supply growth, known as the halving, is adding to the optimistic sentiment. That has helped to extend a prolonged rally that has also stoked speculative appetite for smaller tokens ranging from Ether to Dogecoin.
“We are starting to see a pretty clear FOMO kind of rally,” said Zaheer Ebtikar, founder of crypto fund Split Capital. “More and more people are just convinced to buy.”
To be sure, halvings used to have a significant impact on bitcoin prices as the miners were in control of large portions of the new tokens issued by the blockchain. But the process alone now likely has much less influence on bitcoin since the vast majority of
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