Riding the crypto rollercoaster: Bitcoin nears record high

Bitcoin is at an all-time high, its latest rally prompted by the launch of the first US bitcoin futures exchange-traded fund, which investors think could make the cryptocurrency accessible to new investors. 

But the advent of cryptocurrency ETFs in the world’s largest economy hasn’t been the only driver of this chapter of bitcoin’s 2021 rollercoaster. Here are some charts that look at the dynamics of its push to record highs.

1. Wild swing continues

Bitcoin is known for wildly fluctuating prices, with a 13-year history filled with steep climbs and equally sharp drops.

Its performance this autumn has been no different. The world’s largest cryptocurrency is up more than 60% since mid-September, with more than 46% gain in October alone.

Yet this year it has also seen a dramatic decline. After powering to its current record high of $64,895 in mid-April, bitcoin fell by more than half in just 35 days, with China’s crackdown on the cryptocurrency among the factors.

Analysts said one of the primary reasons for its rally in recent weeks was the stipulation that US regulators previously made bitcoin futures ETFs open to more investment avenues for both retail and institutional investors.

Tony Sycamore of Citi Index said such products would “open up exposure to bitcoin for large investors who have a brokerage account and are comfortable buying stocks and ETFs, but willing to go through the hassle and learning curve of setting up another account.” Not with a cryptocurrency provider”.

2. Increase in inflows again

Yet even before the new ETF launch, the influx of existing bitcoin exchange-traded funds and products was growing rapidly.

Average weekly inflows into bitcoin funds totaled $121.1 million in October, up from $31.2 million a month earlier, data from the London-based CryptoKitties show. They fell into negative territory three months ago, outflows after bitcoin’s sharp losses in May and June.

“We had a pretty sharp sell-off for bitcoin over the summer. Price action has been a recovery from the low,” said Sui Chung, CEO of crypto index provider, CF Benchmark.

“Bitcoin was just seen as cheap – anything below $30,000, attracted a lot of investors, and especially institutional ones.”

Money flows back to bitcoin fund

3. Inflation hedge?

With inflation rising in many large economies, investors are increasingly betting that major central banks will raise rates as a result. Against that background, some market participants say bitcoin’s perceived inflation-proof properties have also driven recent gains.

Since the beginning of July, bitcoin is up about 85%. Some inflation hedged assets have outperformed, with inflation-linked bonds – the US TIPS index – gaining more than 140%. Gold is flat during the same period.

“We may see higher interest rates in global equity markets,” said Joel Kruger at crypto exchange LMX Digital. “Bitcoin is going to be very well supported on this long-term store value proposition and on this hedge against inflation proposition.”

bitcoin vs inflation hedge