After losing 64 percent of its value in 2022, Bitcoin, the world's largest cryptocurrency, has been gaining momentum since last year and crossed the $50,000-mark earlier this week.
The token was valued at 48,812.80 apiece at 5:45 PM UTC, sliding by 2.25 percent as against the previous day's close. Despite the marginal decline, the outlook for Bitcoin remains strong, analysts said, adding that it remains to be seen how close it would reach to its all-time mark clocked three years ago.
The price of Bitcoin was at its highest in November 2021, at $68,789. To breach the mark this year, the digital asset's value is required to increase by around $20,000 apiece.
Here's a look at what led Bitcoin to surpass $50,000:
ETF boost
The primary driver behind bitcoin's recent price appreciation "can be attributed to the increased inflow into BTC spot ETFs," said Matteo Greco, a research analyst at fintech investment firm Fineqia International, in a research note.
The U.S. securities regulator on Jan. 10 approved the first U.S. spot bitcoin ETFs, a watershed for the world's largest cryptocurrency and the broader crypto industry, which had been trying to bring such a product to market for more than a decade.
Greco in particular noted that outflows from Grayscale Investment's Grayscale Bitcoin Trust -- which received approval from the U.S. Securities and Exchange Commission (SEC)in January to convert to an ETF -- have begun to slow.
"While GBTC recorded a cumulative outflow of $415 million last week, representing a significant reduction from previous weeks, BTC Spot ETFs saw a total net inflow of about $1.2 billion during the same period, marking the highest weekly inflow since their launch," he said.
EFTs' inflow to cross $10 billion
Analysts at Bernstein have estimated that flows into the new ETFs will build up gradually to cross $10 billion in 2024, while Standard Chartered analysts have said the products could draw $50 billion to $100 billion this year alone. Other analysts have said inflows could be $55 billion over five years.
The market is also eyeing seven pending applications in front of the U.S. SEC for ETFs tied to the spot price of ether. The SEC is due to deliver a final decision on several of those proposals by May.
Investors are also looking eagerly to the next bitcoin "halving," expected in April, analysts say. That process is designed to slow the release of bitcoin, whose supply is capped at 21 million tokens - of which 19 million have already been created. Bitcoin rallied on the previous three halvings, the most recent of which was in 2020.
"With [the] fourth bitcoin halving, a first Fed interest rate cut and potential ethereum spot ETF approval, all are significant for what is the smallest, youngest and most retail-dominated asset class," said Ben Laidler, global markets strategist at eToro.
With Reuters inputs
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