(Bloomberg) — Bitcoin approached $48,000 and hit a one-month high, supported by signs of steady inflows into a batch of U.S. funds for the token as well as growing attention over the so-called halving planned for April.
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The largest digital asset rose about 4% as of 10:10 a.m. Friday in New York after climbing as high as $47,703. Smaller tokens such as Ether, Solana, and Cardano have also pushed higher. Bitcoin is now up 11% year to date, beating even the mega-cap tech stocks known as the Magnificent Seven.
Traders also pointed to the Chinese Lunar New Year as another factor driving up prices, with market players in the Asia-Pacific region focusing on family reunions and celebrations. During the holiday week, the crypto market has historically faced lower liquidity as the region is one of the most active in crypto. Data from tracker Coinglass shows that around $110 million in short Bitcoin positions were liquidated over the past day as prices continued to climb.
Nine US spot Bitcoin exchange-traded funds debuted on January 11, while the more than decade-old Grayscale Bitcoin Trust converted to an ETF on the same day. The accessibility of ETFs promises to expand the investor base for the token. The new funds have attracted a net $8 billion so far, while the $6 billion outflow from the Grayscale fund since its conversion now appears to be running out of steam.
“Traders are much more excited that Bitcoin ETFs are not only seeing significant inflows, but there is also evidence that there are hodlers as well,” referring to long-term holders, said Naeem Aslam , chief investment officer at Zaye Capital Markets. . “On top of that, the halving event is getting closer and this is creating more excitement among traders, which is positively pushing the price higher.”
The four-year halving reduces the amount of Bitcoin miners receive to run power-hungry computers that secure the network by solving complex puzzles. The halving is key to limiting Bitcoin’s supply to 21 million tokens. Rewards drop to 3,125 coins per block from 6.25 coins in the next event.
Previous halving events “preceded sharp rises”, a team including DBS Bank Ltd’s chief economist wrote. Taimur Baig in a note. “There is a simple economic reason why prices should increase. As the mining reward decreases, the price of mining output (i.e. Bitcoin) must increase to compensate and not trigger a withdrawal of computing resources by miners,” the team said.
Bitcoin remains about $22,000 below the token’s record high in 2021, during a pandemic-era bull run fueled by easy money.
–With help from Akshay Chinchalkar, Suvashree Ghosh and David Pan.
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