ETF Momentum Boosts Bitcoin Market Cap to $1 Trillion

Thanks to a recent surge in ETF inflows, Bitcoin prices have reached a new high not seen in over two years, with options traders betting on a historical high in sight...

On Wednesday, coinciding with the fifth day of the Chinese Lunar New Year, known as "Greeting the God of Wealth," the cryptocurrency market continued its "frenetic" Spring Festival rally. Data from CoinGecko shows that as Bitcoin and Ethereum rose, Bitcoin's market value returned above $1 trillion, and the total market value of cryptocurrencies returned above $2 trillion.

The price of Bitcoin broke through the $51,000 per coin level, setting a new high since December 2021. Since the beginning of February this year, the world's largest cryptocurrency has risen by about 20%, marking the largest monthly increase since last October.

Prices of other cryptocurrencies have also risen. According to CoinDesk data, Ethereum touched $2,759.93 per coin on Wednesday, the highest level since May 2022. Investors expect the SEC to also approve spot Ethereum ETFs this year.

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Analysts say that the strong capital inflows into newly listed spot Bitcoin ETFs in the United States in recent weeks have driven part of the price trend.

Data shows that in the week ending Wednesday, the inflow of funds into the 11 spot Bitcoin ETFs in the United States increased to $1.64 billion. These ETF products began trading after receiving regulatory approval in January.

Analysts at cryptocurrency liquidity provider B2C2 said: "It remains to be seen whether such a rate of (capital inflow) will continue, but in the cryptocurrency field, prices often drive capital flows."

The options market shows that investors are increasing their bets that Bitcoin will set a new historical high. According to data from Deribit, the largest cryptocurrency options exchange, the number of open contracts for call options expiring on March 29 with strike prices of $60,000, $65,000, and $75,000 has increased significantly.

K33 Research Senior Analyst Vetle Lunde said: "The entire options market is currently preparing for Bitcoin to continue its growth momentum in the coming months."

Chris Newhouse, a DeFi analyst at Cumberland Labs, pointed out: "Options trading with strike prices in the $75,000-$100,000 range may be more of a bet on longer-term implied volatility rather than a pure directional bet."The potential interest rate cuts and halving by the Federal Reserve are one of the main drivers that could push up the price of Bitcoin. The Bitcoin halving event occurs every four years, and it is expected to trigger the 4th halving event by the end of April 2024.

When the halving occurs, the rewards given to Bitcoin miners will be reduced by half, which will decrease the number of Bitcoins in the market.

Historically, halving events have driven Bitcoin to reach new highs in the following months. The last time Bitcoin reached an all-time high was in November 2021, when the price was just under $69,000.