Bitcoin just surpassed its all-time high price, what’s driving this rally?

The success of Bitcoin ETFs and other technical indicators signal a bullish trend for crypto assets.

Crypto token Bitcoin crossed all-time high pricing of $72,000 on March 12, driven by the London Stock Exchange’s announcement of accepting Bitcoin and Ethereum Exchange-Traded Notes (ETNs) from the second quarter of 2024.

The Satoshi Nakamoto-created token has been seeing an unstoppable rally in its price and trading volumes for over a month now.

What’s driving the surge in Bitcoin prices?

The most prominent factor behind this rally is the acceptance of Bitcoin Exchange-Traded Funds (ETF) by the US Securities and Exchange Commission (SEC). This had led to major financial institutions such as Blackrock, Vanguard, Valkyrie, Vanek, and Fidelity launching their ETFs.

According to a report by crypto research firm CREBACO, the cumulative inflow of institutional money into Bitcoin through these ETFs has reached $41 billion. A significant portion of this inflow came in the past two months.

“In just over two months of going live, Blackrock's IBIT and Fidelity's FBTC have already accumulated more than $12bn and $7.5bn in AUM,” said Parth Chaturvedi, Investments Lead, CoinSwitch Ventures.

Also read: World Street | Crypto may debut on LSE, Bitcoin blazes past $70k, Reddit to launch IPO and more

Are there other crypto tokens benefiting from this?

With Bitcoin getting really expensive, other tokens such as Ethereum, Solana, Shiba Inu too gained quite some traction.

According to Rajagopal Menon, Vice President, WazirX, the minor retracements after Bitcoin's $71,000 high in the last 24 hours was an impetus for altcoins including memecoins to surge. “Solana and Ethereum are already riding this wave with around 12 and 15 percent growth in the last 7 days, respectively. Shib is predicted to reflect similar patterns based on its market indicators and is already up by 28% in the last 7 days,” he said.

On CoinSwitch, Ethereum, Solana, Uniswap, Render and Shiba Inu gained the most, the crypto investment platform told Moneycontrol.

Is the next crypto bull run around the corner?

The crypto industry is seeing this uptick in prices and trading volumes, after nearly two years of slump and several issues such as FTX collapse, high taxes, uncertainty around regulations fanning negative sentiments for the sector.

But in 2024, things have finally started to look up with the approval of Bitcoin ETFs, Bitcoin halving event happening next month and an impending approval of Ethereum ETFs.

Halving happens approximately every four years wherein new Bitcoins are mined but the reward for mining gets split into half.

“The halving event, expected around April 20th, will reduce miner rewards from 6.25 to 3.125 BTC. Historically, Bitcoin rallies have often preceded halving events, and this time is no exception. Despite the recent rally being primarily driven by ETF inflows, the halving event is anticipated to have a positive impact on Bitcoin's price,” the CREBACO report said.

Are retail investors participating in this price jump?

CoinSwitch’s Chaturvedi pointed out that retail participation is still nowhere close to the mania seen in 2021, but he believes that the interest in crypto as an asset class will become more mainstream.

“Even though most experts were predicting such flows for the entire year of 2024, the speed of accumulation and subsequent price rise were unexpected,” he added, referring to the quick spike in volumes following Bitcoin ETF approvals.

WazirX’s Menon said, “The ecosystem is bracing itself for new highs and trying to enter the market for better gains.”

Can Indian investors access Bitcoin ETFs?

While Indian crypto platforms cannot readily offer Bitcoin ETFs due to the lack of regulations around crypto in the country, investors can access it through US-based brokerages. Though this would have several tax implications such as Liberalized Remittance Scheme (LRS), which lets Indians remit up to $250,000 in a financial year.

Additionally, for LRS amounts crossing Rs 7 lakh, retail investors will be charged 20 percent TCS.

But, crypto investment platform Mudrex on March 11 launched its US Bitcoin spot ETF offering focussed on Indian investors. It starts with a minimum investment of $5,000 and a maximum of $250,000.

When asked about the taxes that will be applicable, Edul Patel CEO of Mudrex told Moneycontrol that in India all banks facilitate money transfers through the LRS.

"Mudrex along with our banking partners, aligns with this framework. Presently, Bitcoin spot ETFs are seen as securities and subject to taxation in a manner consistent with standard securities taxation practices," Patel explained.