How to explain the recent surge in cryptocurrency prices, which reached a new record of over $69,000?

The value of this digital asset decreased in 2022 after several financial scandals. It has since recovered, thanks in particular to new ways of betting on its value.

The dean of cryptocurrency is back from the dead. Bitcoin’s exchange rate reached a new record high of $69,000 (over 63,400 euros) in financial markets on Tuesday, March 5. The exact value, however, varies depending on the exchange platform used, but it is a historical level, the previous mark since November 2021.

This is a symbolic step after a positive year. Crypto-asset prices compensated for the declines recorded in late 2021 and 2022, in a difficult economic context, marked by multiple bankruptcies and financial scandals that rocked the sector. How can we explain this return in favor of buyers? Franceinfo lists some of the components of the response.

New funds to bet on the price of bitcoin

The launch of new financial products, which allow you to bet on the price of the cryptocurrency without directly holding it, is one of the main reasons for this surge in Bitcoin. In January, the American financial markets regulator, the SEC, announced that “ETFs” (net “Exchange Traded Fund”) and is designed as a tracker to follow the price evolution of digital assets. If the value of Bitcoin increases, the value of the ETF shares should also increase, and vice versa if it decreases.

And to follow the price of this digital asset, funds must buy or sell it, which therefore contributes to the demand for bitcoins. Since their inception, Bitcoin ETFs have amassed the likes of BlackRock, the world’s largest asset manager. “assets that represent more than 3% of all existing bitcoins”eToro analyst Simon Peters notes to AFP.

So an investor can bet on the price of Bitcoin without holding direct holdings and thus avoid all the complexities (real or perceived) of managing a digital portfolio, trading on a dedicated platform, transaction fees, etc. Bitcoin thus becomes an excellent financial product, making it more attractive to investors who want to take less risk, especially “institutional investors” (for example pension funds or insurance companies). For cryptocurrency supporters, the approval is a sign that bitcoin will be used more widely in the future, further fueling enthusiasm in the markets.

“Halving”, a technological event that will make the creation of bitcoins even rarer

Speculators are also betting on a rise in bitcoin prices as less and less will be issued. In April, A “half” (“halving” in English), a technical change due to the programming of the technology on which Bitcoin is based: the famous “Blockchain”.

The Bitcoin infrastructure relies on “miners”, who work to maintain records of transactions between the owners of this crypto-asset. To ensure the validity of exchanges and add “blocks” to the chain of transactions, their computers must solve very complex calculations – and miners who succeed are rewarded with bitcoins.

The reward is halved every 210,000 blocks, roughly every four years. everyone “half” By now prices have risen (partly self-sustaining because speculators fear missing out). So the total number of available bitcoins does not decrease, but the event reminds us that the source is slowly “drying up”.

A global return of confidence in markets

This increase in the valuation of popular cryptocurrencies is also due to the positive global context. Major global stock indices have also recorded gains in recent months and, historically, bitcoin price movements are often tracked with these indices.

Scams and large-scale fraud, which brought down major players in cryptocurrency (such as the FTX platform) and attracted strong media attention in 2022, are now more distant memories. In the eyes of some, the field is healthy today freed from these bad examples, even if fraud, technical problems and hacking are still rampant, as evidenced by the review site Web3 Is Going Just Great.

But, as with any financial asset, there is no guarantee that these price increases will continue. In 2017, the previous cycle of frenzied enthusiasm was already followed by a collapse in prices. “It’s rarely a good idea to buy following a price increase”An analyst at AJ Bell Investment Platform estimates to AFP that he recalls “Previous episodes have shown that people who reach the peak of rage suffer greatly”.

After surpassing its record, bitcoin’s price also fell several thousand dollars on Tuesday (briefly returning below the symbolic threshold of $60,000), before rebounding, according to the CoinDesk platform. A simple correction that can be linked to many factors (profit taking, lack of liquidity, technical problem, etc.) but which once again recalls the very high volatility of the most famous cryptocurrencies.