(Bloomberg) -- Bitcoin is making a run toward the $49,000 high reached last month when a batch of US spot exchange-traded funds began trading, supported by signs of steady inflows as well as growing attention on the so-called halving due in April.
The largest digital asset rose about 5.6% at 1:44 p.m. in New York on Friday after climbing as high as $48,187. Smaller tokens such as Ether, Solana and Cardano also pushed upward. Bitcoin is now up 12% so far this year, beating even the so-called Magnificent Seven mega-cap tech stocks.
Traders also pointed to the Lunar Chinese New Year as another factor in the price gains, with market participants in the Asia Pacific region focusing on family gatherings and celebrations. During the week-long holiday, the crypto market historically has faced lower liquidity, since the region is one of the most active for crypto. Data from tracker Coinglass shows that just about $110 million of Bitcoin shorts positions were liquidated during the past day as prices continued to climb.
Nine US spot Bitcoin exchange-traded funds debuted on Jan. 11, while the more than decade-old Grayscale Bitcoin Trust converted into an ETF the same day. The accessibility of ETFs promises to widen the investor base for the token. The new funds have attracted a net $8 billion so far, while a $6 billion outflow from the Grayscale fund since its conversion now appears to be losing steam.
“Traders are a lot more enthusiastic that Bitcoin ETFs are not only experiencing great deal of inflow, but there is also an evidence that there are hodlers there too,” referencing long-term holders, said Naeem Aslam, chief investment officer at Zaye Capital Markets. “In addition to this, the halving event is getting closer and this is creating more excitement among traders, which is positively pushing the price higher.”
The quadrennial halving cuts the quantity of Bitcoin that miners receive for operating power-hungry computers that secure the network by solving complex puzzles. Halving is key to capping the supply of Bitcoin at 21 million tokens. Rewards drop to 3.125 coins per block from 6.25 coins in the upcoming event.
Previous halving events “preceded strong bull runs,” a team including DBS Bank Ltd. Chief Economist Taimur Baig wrote in a note. “There is a simple economic reason why prices should rise. As the reward for mining decreases, the price for mining output (namely Bitcoin) must increase to compensate and not trigger a withdrawal of computational resources by miners,” the team said.
Bitcoin remains about $22,000 below the record high the token hit in 2021, during a pandemic-era bull run oiled by easy money.
--With assistance from Akshay Chinchalkar, Suvashree Ghosh and David Pan.
(Adds trader comment in the fifth paragraph.)
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