Bitcoin (CRYPTO: BTC) prices are rising again, with the price of the cryptocurrency surging just year to date. The price of Bitcoin is already up 128% in the last year, and about 53% year to date as of writing. However, the price of Bitcoin has come down from 52-week highs; it is currently down 10% since those highs.
So, what’s been fuelling this rally in the cryptocurrency? And what should investors consider before jumping in? Here’s why everyone is talking about Bitcoin again.
What happened?
First, there was the approval of spot Bitcoin exchange-traded funds (ETFs). While cryptocurrency ETFs were already approved in Canada, the approval in the United States was a huge move. These ETFs directly hold Bitcoin and allow institutional investors to participate. This area has been previously hesitant due to regulatory concerns or lack of infrastructure in the past.
The influx of institutional money into Bitcoin increased the demand for the cryptocurrency and drove up the price in the process. Furthermore, ETFs provide a convenient way for retail investors to get exposure to Bitcoin without having to directly buy and store cryptocurrency themselves. This, of course, further increased the demand for Bitcoin and other cryptocurrencies in the process.
There has been speculative interest in Bitcoin as well. This comes from the potential for high returns. The recent economic uncertainty that comes with inflation or volatility in traditional markets has caused investors to seek alternative assets, like Bitcoin, as a hedge. Investors often look for these types of assets that store value and have the potential for significant appreciation. And Bitcoin, as it has a limited supply and decentralized nature, is attractive in this light.
What could happen next?
While this might be interesting now, it could change in the future. Institutional adoption could continue, and more ETFs and other investment vehicles could introduce more access to Bitcoin easily. This could fuel further demand and drive up the price.
Regulatory changes of clearer guidelines could provide more certainty, leading to more retail and institutional investors as well. However, this could also be the opposite, as less clear guidelines and increased scrutiny could cause the price to drop.
Other changes might include the change in the market and economic futures. Since Bitcoin is being used as a hedge, as the market and volatile economy improve, investors could get out and put money elsewhere. Bitcoin overall is seen as volatile, so share price corrections aren’t exactly uncommon. Therefore, it might be best to look at investing in companies that invest in Bitcoin and other areas.
A strong option
Instead of just investing in Bitcoin, even through an ETF, it might be good to invest in companies that also invest in technological advancement. For instance, there are companies investing in the storage of Bitcoin as well as data in general.
One company is Hut 8 (TSX: HUT). Hut stock used to mine for cryptocurrency, and that was it. However, it’s since expanded into data storage. It’s been growing both from the increase in Bitcoin prices as well as the increase in its data centre use.
The company recently reported substantial growth in earnings and adjusted earnings before interest, taxes, depreciation, and amortization. However, this was only from the last six months of 2023. Even more growth has come in 2024. And that should continue to be the case in 2024, as Bitcoin increases, and its data centres earn more clients.
