Bitcoin, the most valuable cryptocurrency in the market, continues its ascent in 2024, with an impressive increase of 55.79% in its price, rising from $42,272.5 to $65,858.2. This growth has been largely driven by the increasing interest from investors in exchange-traded funds (ETFs) authorized by the Securities and Exchange Commission (SEC) since January 10.
With a market capitalization of $1.25 trillion, bitcoin represents 54.85% of the total cryptocurrency market. In Bitcoin’s shadow, Ethereum follows with $317.63 billion (13.94%), ether with $119.1 billion (5.22%), and Binance with $87.77 billion (3.84%).
Since its launch on January 11, the 11 ETFs that track Bitcoin’s price have averaged a return of 40%. The Grayscale ETF is one of the main players, with $13.99 billion in total assets under management, while the smallest is the WisdomTree fund, with $234 million.
Other notable ETFs include the iShares Bitcoin Trust (IBIT) from BlackRock, which grew by 40.41%, and the Fidelity Wise Origin Bitcoin Fund (FBTC), which increased by 40.48%.
Geoff Kendrick, head of Cryptocurrency Research at Standard Chartered, notes that BlackRock’s recognition as one of the most reliable fund managers has boosted investor confidence in these ETFs, contributing to bitcoin’s surge.
Factors Behind Bitcoin’s Growth
Market analyst Diego Albuja from ATFX explains that the recent rise in bitcoin’s price has been favored by expectations of interest rate cuts in the United States, leading to increased market liquidity. Additionally, the weakening of the dollar has made dollar-denominated assets, such as Bitcoin and Ethereum, more attractive to investors.
To date, bitcoin’s price has fluctuated between $54,000 and $72,000, while Ethereum is within a range of $2,250 to $3,350 in September. In contrast, ethereum ETFs have suffered a decline of about 23% since their launch in July.
Grayscale remains the largest ETF in this sector, with $4.5 billion in assets, while the smallest, 21Shares, has only $10 million.
Impact of Interest Rates
One of the reasons behind the rise in the price of Bitcoin and other cryptocurrencies is the Federal Reserve’s decision to cut interest rates by half a point. Historically, bitcoin tends to rise during periods of monetary policy easing by the Fed.
Albuja highlights that as long as interest rates continue to decrease, bitcoin and Ethereum prices are likely to keep rising, although the market may be susceptible to unexpected events.
During the 2020 pandemic, bitcoin experienced a remarkable increase of 1,600%, reaching over $64,000 in April 2021, when the Fed kept rates at 0.25%.
From a global perspective, QCP Capital, a digital asset investment firm, considers that the bullish trend in cryptocurrencies is also due to economic stimulus announcements in China and the Fed’s interest rate cuts.
On September 19, when the Fed announced the cut, bitcoin’s price advanced by 2.3%, while Ethereum surged 8.7%.
Conclusion
With the cryptocurrency market valued at $2.3 trillion and more than 21,337 cryptocurrencies in circulation, the outlook for Bitcoin and other digital assets remains promising. The appetite for bitcoin ETFs has catalyzed this growth, further solidifying bitcoin’s position as the leader in the cryptocurrency market.