Bitcoin hits record above $71,000 as demand frenzy intensifies

© Reuters. Representations of cryptocurrency Bitcoin are seen in this illustration picture taken in Paris, France, March 9, 2024. REUTERS/Benoit Tessier/Illustration/file photo

By Amanda Cooper and Harry Robertson

LONDON (Reuters) – Bitcoin hit a record high on Monday above $71,000, as the surge in the biggest cryptocurrency showed no signs of slowing down.

Britain’s financial watchdog on Monday became the latest regulator to pave the way for digital asset trading products after saying on Monday it will now permit recognised investment exchanges to launch crypto-backed exchange-traded notes.

Bitcoin rose by as much as 4.8% to a record $71,677 in European trading, bringing gains for the year so far to 70%.

The world’s most valuable cryptocurrency has been boosted by a flood of cash into new spot bitcoin exchange-traded funds as well as hopes that the Federal Reserve will soon cut interest rates.

Flows of capital into the 10 largest U.S. spot bitcoin exchange-traded funds slowed to a two-week low in the week to March 8, but still reached almost $2 billion, according to LSEG data.

“Bitcoin has started the week with a surge, dragging the rest of the cryptocurrency space higher with it,” DailyFX strategist Nick Cawley said.

Supply of bitcoin, which is limited to 21 million tokens, is going to get tighter in April, when the so-called halving event takes place.

Every four years, the rate at which new supply is released into circulation, as well as the reward for crypto miners, is halved, which tends to support the price.

“News also out earlier that the LSE plans to accept applications for bitcoin and ethereum ETNs in Q2 may have also helped today’s push higher,” Cawley said.

The UK regulator said these products would be only available for professional investors such as investment firms and credit institutions authorised to operate in financial markets, the Financial Conduct Authority (FCA) said in a statement.

The FCA warned crypto exchange traded notes (ETNs) – bonds issued by financial institutions that track the performance of underlying assets – pose harm to retail investors.

Nonetheless, demand is picking up across the investment community.

Asset managers now hold the biggest bullish position in bitcoin futures on record, according to weekly data from the U.S. Commodity Futures Trading Commission.

In the week to March 5, the net long position held by asset managers – usually interpreted as covering holdings of institutional investors such as mutual funds and pension funds – rose to 15,531 lots, worth $5.5 billion based on the current bitcoin price.

This is more valuable than the long position asset managers hold in sterling, worth $2.78 billion or the bearish position they hold in the Japanese yen against the dollar, worth $1.49 billion, according to LSEG data.

Ether rose 2.1% to nudge $4,000, around its highest for two years. Speculation that U.S. regulators may approve the listing of spot ether ETFs this year has driven the price up 75% this year.