Bitcoin, the world’s leading cryptocurrency, has witnessed a remarkable resurgence, with its value surging more than threefold to $52,000 since November 2022. The crypto space experienced challenges in 2022, notably marked by the high-profile collapse of the FTX exchange, leading to liquidity crises at several smaller crypto firms.
Amid Bitcoin‘s gains in 2023, investors have re-entered the market in significant numbers, propelling the cryptocurrency’s market capitalization above $1 trillion for the first time since its peak in 2021, according to data from CoinMarketCap. Unlike traditional currencies, Bitcoin’s supply is limited, and it is expected to reach its peak in 2140, as indicated by the price-tracking website for cryptocurrencies.
The recent influx of funds into Bitcoin can be attributed to the launch of exchange-traded funds (ETFs) that directly invest in the cryptocurrency. These funds have made it more accessible for retail investors to participate in Bitcoin, leading to a nearly 13% increase in its value since January 10, following the regulatory approval by US authorities for investment firms to offer such funds.
While Bitcoin is still below its all-time high of $69,000 in November 2021, industry experts interviewed by CNN anticipate further upward momentum in the coming year, with the possibility of surpassing previous peak levels. The optimism is fueled, in part, by Bitcoin’s upcoming “halving,” a feature in its design that automatically reduces the rate of new coins entering circulation, occurring approximately every four years.
Gareth Rhodes, former deputy superintendent at the New York State Department of Financial Services, highlighted the historical bullish price action associated with each halving event. However, it is essential for investors to recognize the inherent risks of Bitcoin, characterized by its volatility and susceptibility to significant value swings, all while remaining under the scrutiny of regulatory authorities.
In January, before approving Bitcoin ETFs, Gary Gensler, chair of the US Securities and Exchange Commission, emphasized the risks associated with cryptocurrency investments, noting instances of major platforms and crypto assets becoming insolvent or losing value. The evolving regulatory landscape underscores the need for caution among investors engaging with the digital asset.
