Bitcoin Rally: New Opportunities for Arbitex Investors
Bitcoin, the world’s largest cryptocurrency by market capitalization, reached a new high on Tuesday following a prolonged rally. Some observers suggest that Bitcoin, once a niche alternative investment, has gone mainstream, which could have significant implications for its future price trend. Anne Gaviola provides more information on the factors driving this latest Bitcoin rally and why you should consider adding it to your portfolio – March 5, 2024.
Bitcoin Price Hits New High
The price of Bitcoin hit a new high on Tuesday following a prolonged rally. As the world’s largest cryptocurrency, Bitcoin has experienced a series of volatilities on this journey.
Speaking to Global News, analysts suggested that investors should consider whether to include Bitcoin and cryptocurrencies in their portfolios alongside assets like gold.
Bitcoin reached an all-time high of $69,202 USD during intraday trading on Tuesday, surpassing its previous peak of $68,999.99 USD in November 2021. It later pulled back and ended the day with a loss, trading below $63,000 USD by 3:00 PM Eastern time.
The nearly 160% overall rise in Bitcoin since October 2023, with 44% of that increase occurring just in February, sharply contrasts with the 18-month decline marked by high-profile institutional bankruptcies and scandals during the crypto winter of 2022.
Regulation Approval and the Popularity of Bitcoin ETFs
The shift in Bitcoin’s outlook came with an anticipated regulatory approval at the start of the new year. One of the factors driving the price increase at the end of 2023 was the expectation that the US Securities and Exchange Commission (SEC) would approve Bitcoin exchange-traded funds (ETFs).
This expectation was realized on January 10, when BlackRock, the largest asset manager in the US, received approval for 11 spot Bitcoin ETFs.
ETFs provide investors with exposure to a basket of stocks, bonds, and other assets without owning the entire basket. Experts liken Bitcoin ETFs to gold funds, allowing investors to gain exposure to the asset without directly owning it and without the hassle of storage.
Bitcoin ETFs and Increasing Demand
Bitcoin ETFs, which have been approved in Canada for years and launched in Europe last year, have increased demand for the asset with their adoption in the US. Greg Taylor, Chief Investment Officer at Purpose Investments, notes that it makes it easier for US retail investors to access this asset.
Bitcoin ETFs increase investor interest in Bitcoin by avoiding the complex processes of opening a digital wallet and managing it on a crypto exchange. This offers convenience similar to holding gold in a vault.
Halving Event and Market Impact
Another event exciting investors in the crypto market is the four-yearly “halving” event. The next halving event, which reduces Bitcoin production by half, is scheduled for April 2024.
Bitcoin’s price has typically increased following a halving event. This is due to a sense of scarcity created as miners’ production capacity is halved. Taylor explains that a halving event occurring during a surge in Bitcoin ETFs will put more pressure on supply as demand increases.
Macroeconomic Factors and Investor Behavior
Bitcoin and cryptocurrencies have also been supported by the likelihood of the US Federal Reserve lowering interest rates. A drop in interest rates could prompt investors to seek higher returns or more volatile assets.
Alvin Tan, head of Asia FX strategy at RBC Capital Markets, says, “Part of the Bitcoin rally is due to a generally positive sentiment towards risk assets.” This year, investors have particularly focused on cryptocurrencies, mega-cap tech stocks, and investment-grade corporate bonds.
Is Bitcoin a Good Option for Your Portfolio?
Greg Taylor states that while Bitcoin’s nature hasn’t changed and it remains volatile, the asset is here to stay and behaves like a long-term commodity. Bitcoin’s recovery after the difficult period of 2022 provides confidence to investors, even though some analysts had completely written off the cryptocurrency.
Taylor suggests that investors should keep Bitcoin on their radar and that a small exposure to this asset could be beneficial for portfolio diversification.
Ethereum and Other Investment Opportunities
Taylor advises that investors should not get overly captivated by crypto but those looking for opportunities should also consider Ethereum, the second most popular cryptocurrency after Bitcoin. Speculations about an Ethereum ETF being approved in the US suggest that Ethereum could follow Bitcoin’s gains.
Alex Tapscott suggests that investors look at other hot investment opportunities like artificial intelligence to benefit from Bitcoin’s rise. Believing strongly in the next wave of innovations connected to blockchain technology and “web3” applications, Tapscott emphasizes that there are still many risks in the market.
Quoting Warren Buffett, Tapscott says, “When the tide goes out, you see who’s been swimming naked,” indicating that many people can lose money during speculative periods.
At Arbitex, we advise investors to evaluate their crypto investments thoughtfully and carefully.
