Bitcoin is headed to its all-time high after rallying by more than 4% to highs of $57,000 a coin. The flagship cryptocurrency rally to two-year highs comes against the backdrop of positive market developments and growing interest from institutional investors. Crypto investing software firm MicroStrategy’s disclosure of a purchase of 3,000 Bitcoin’s is the latest catalyst fuelling the rally in the broader market.
Improving Crypto Fundamentals
With the purchase, MicroStrategy has cemented its position as the largest publicly traded Bitcoin owner. The Virginia-based company now owns close to 190,000 cryptocurrency tokens valued at over $10.5 billion. The crypto bull engaging in a buying spree continues to fuel sentiments after years of deep pullbacks and wild swings.
Expectations of further price gains continue growing as institutional investors flock to the sector as they look for alternative assets to diversify their portfolios. Growing confidence about crypto investments is also being fuelled by improving regulatory frameworks. The approval of a Bitcoin exchange-traded fund by the US Securities Exchange is one factor that has helped draw in more investors into the sector.
The approval of a BTC ETF has helped bolster expectations that regulators would go slow on crackdowns and be stringent of the sector that is still in the early stages of development. In addition to improving regulatory frameworks, the bullish sentiments have been growing in strength ahead of the much-awaited Bitcoin halving event in April.
The Bitcoin halving event is expected to reduce the amount of rewards miners get on mining a Bitcoin. Consequently it is expected to result in a reduction in BTC in circulation. Reduced supply amid high demand is one factor expected to continue pushing prices higher. The event occurs every four years and is usually preceded by a s strong rally in the overall markets.
Nevertheless, the record capital inflow from institutional investors into Bitcoin ETFs is expected to continue pushing prices higher ahead of the big event. Institutional investors flocking to the sector adds a layer of credibility to an industry that has been shunned over the years over concerns of heightened volatility.
Cryptocurrencies Rally
The overall cryptocurrency sector is also benefiting from the weakness of the dollar. A weakened dollar favors cryptocurrencies, as the two have historically shown an inverse correlation. Further weakening of the dollar could come into play on strong US economic data that fuel expectations of the US Federal Reserve cutting interest rates.
Bitcoin is not the only cryptocurrency flying high amid the improving fundamentals in the sector. Ether has also been making big moves, having already powered to record highs of $3,200. While Bitcoin is up by about 33% for the year Ether has outperformed going by its 40% gain. Ripple and Solana, other coins at the heart of financial transactions, are also powering high amid the crypto boom.
Despite the recent gains, the overall crypto market has yet to reach the highs recorded in 2021, when the overall crypto market cap topped highs of $3 trillion. The sector is still recovering from high-profile failures and scandals, including the FTX exchange implosion and the collapse of lender Celsius.