(Bloomberg) — Bitcoin has climbed above the 40,000 mark reached last month when U.S. spot ETF trading began, buoyed by signs of steady capital inflows and increased attention to the so-called halving scheduled for April. It is rising towards a high of $9,000. .
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The largest digital asset rose about 5.6% to $48,187 at 1:44 p.m. in New York trading on Friday. Smaller tokens such as Ether, Solana, and Cardano also rose. Bitcoin is up 12% since the beginning of the year, outpacing even the so-called Magnificent Seven megacap tech stocks.
Traders also pointed to the Lunar New Year as another factor in the price rally, with Asia-Pacific market participants focusing on family gatherings and celebrations. Cryptocurrency markets have historically faced reduced liquidity during the week-long holiday, as the region is one of the most active regions for crypto trading. According to data from tracker Coinglass, just about $110 million of short Bitcoin positions were liquidated in the past day as the price continued to rise.
Nine U.S. spot Bitcoin exchange-traded funds debuted on January 11, with the more than 10-year-old Grayscale Bitcoin Trust converting to an ETF on the same day. The ease of access to ETFs is expected to widen the token investor base. The new fund has raised a net $8 billion so far, but the $6 billion in outflows since the conversion from the Grayscale fund now appear to be losing momentum.
Naeem Aslam, chief investment officer at Zayi Capital Markets, said of long-term holders, “Traders are seeing not only a lot of money flowing into Bitcoin ETFs, but also evidence that there are hodlers there. “They are very enthusiastic about this,” he said. . “In addition to this, the halving event is approaching and this is causing further excitement among traders, which is pushing the price aggressively.”
The quadrennial halving will reduce the amount of bitcoin miners receive to solve complex puzzles and operate the power-hungry computers that protect the network. The halving is key to limiting Bitcoin’s supply to 21 million tokens. In the upcoming event, the reward will decrease from 6.25 coins to 3.125 coins per block.
Previous halving events have been “preceded by strong bull markets,” the team, which includes DBS Bank chief economist Taimur Baig, wrote in a note. “There is a simple economic reason for prices to rise. As mining rewards decrease, the price of mining output (i.e. Bitcoin) will increase to compensate and to avoid causing a withdrawal of computational resources by miners. We need to rise,” the team said.
Bitcoin remains about $22,000 below the all-time high the token hit in 2021 during the pandemic-era easy money bull market.
–With assistance from Akshay Chinchalkar, Suvashree Ghosh, and David Pan.
(Adds trader comment in 5th paragraph.)
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