Bitcoin is experiencing a surge in activity which is leading it towards its biggest monthly gain in over three years. The cryptocurrency, which has the largest market capitalisation, is currently hovering at $61,100 in Asia morning trade, following a high of $63,933 overnight. Its monthly gain is more than 44%, the largest since December 2020. This rally is being driven by cash flowing into listed bitcoin funds, and it is likely to continue as momentum builds towards its record high of $69,000. Ether, a smaller cryptocurrency, is also being pulled along for the ride, with its value up 50% in February. The surge is being attributed to the approval and launch of spot bitcoin exchange-traded funds in the U.S., which has opened up the asset class to new investors and reignited excitement around cryptocurrencies.
The head of Coinbase Global has reported a surge in traffic to the exchange as a result. Despite warnings from some analysts about the potential for a bubble, the parabolic-rally phase of bitcoin appears to be continuing with no immediate signs of a top. Traders have also poured into bitcoin ahead of April’s halving event, in which the rate at which tokens are released is cut in half, along with the rewards given to miners. The supply of bitcoin is limited to 21 million, of which 19 million have already been mined. Investors are seeking higher-yielding or more volatile assets in anticipation of a series of rate cuts from the Federal Reserve this year.
This is driving foreign exchange volatility to two-year lows and settling the U.S. equity volatility index back to pre-pandemic ranges. According to LSEG data, the 10 largest spot bitcoin ETFs brought in $420 million on Tuesday alone, with the three most popular run by Grayscale, Fidelity and BlackRock seeing volumes surge.