Investing.com-- The price of bitcoin hit an over two-year high on Tuesday, with the world’s largest cryptocurrency crossing key levels amid consistent capital flows into the recently approved spot exchange-traded funds.
Bitcoin rose 3.2% to $50,160.2 by 20:13 ET (05:13 GMT), crossing the $50,000 mark for the first time since December 2021. The token was now about $19,000 away from making new record highs.
Gains in bitcoin came amid consistent capital flows into the recently-approved spot ETFs, which saw net inflows of over $1 billion in the past week, digital asset management firm CoinShares said in a report on Monday. BlackRock Inc's (NYSE:BLK) iShares Bitcoin Trust (NASDAQ:IBIT) saw the biggest inflows for the week, at about $690 million.
The token also benefited from slowing outflows from Grayscale Bitcoin Trust (NYSE:GBTC), which gained approval from the Securities and Exchange Commission (SEC) last month to convert into a spot ETF. This conversion saw the release of about $2 billion worth of bitcoin onto the open market, which caused steep losses in the price of the cryptocurrency.
The token had fallen as much as 20% after the approval of the spot ETFs, but has now recouped all of those losses.
Analysts at Bernstein noted that an element of “fear of missing out”, or FOMO, was also attracting some retail interest in the cryptocurrency, and that the token was well-placed to hit record highs on FOMO-driven buying.
Bernstein expects flows into the new ETFs to cross $10 billion in 2024.
Markets were also focused squarely on an upcoming halving event this year, which is expected in April. The event cuts the rate at which new bitcoins are generated by 50%, and has historically spurred a rally in the cryptocurrency.
The most recent halving took place in May 2020, with the lead-up to the event seeing a 50% spike in bitcoin prices.
Optimism over the potential approval of a spot ethereum ETF drove gains in broader crypto markets, with the world no.2 cryptocurrency rising 6.3% to a one-month high of $2,672.25.
U.S.-listed crypto stocks saw strong gains on Monday, with exchange Coinbase Global Inc (NASDAQ:COIN) rising 3.8%, while bitcoin miner Marathon Digital Holdings Inc (NASDAQ:MARA) surged 14.2%. MicroStrategy Inc (NASDAQ:MSTR), which is the largest corporate holder of bitcoin, rose 11%.
But the broader crypto market is still struggling with decreased retail interest, especially following a series of high-profile frauds, bankruptcies and regulatory crackdowns over the past two years.
This was evident with spot trading volumes in bitcoin remaining well below their 2021 and 2017 peaks. The lower trading volumes also factored into the token’s rapid gains through 2023, as bitcoin benefited from an absence of active sellers.
The SEC and Coinbase are currently embroiled in a legal battle that could dictate the nature of crypto tokens and cause a shift in their regulatory standing.