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TOKYO — With bitcoin prices touching a new high on Tuesday, its market capitalization of over $1.35 trillion approached that of silver as investments flow in due to policy-driven factors, demand as a safe-haven asset and wider adoption of the cryptocurrency.
Bitcoin prices reached $69,045 on Tuesday, up more than 3% from the previous day, breaking the record high of $68,990 set in November 2021, according to research firm CoinDesk. Prices fell after that due to profit-taking before rebounding again somewhat, hovering around $66,000 on Wednesday morning in New York.
Bitcoin has increased in value 63% since the beginning of the year, far exceeding the increases in global stock indexes like the Nasdaq Composite’s 6% and the Nikkei Stock Average’s 19%. Bitcoin’s total market value reached $1.35 trillion on Tuesday, surpassing an all-time high set in November 2021 and approaching silver’s overall market value of about $1.36 trillion.
Recent movements by the U.S. Securities and Exchange Commission have contributed to bitcoin’s dramatic rise. The SEC has sought to draw a firm line between the more than 20,000 types of cryptocurrency and traditional securities, suing major exchanges Coinbase Global and Binance for violating securities laws in June 2023.
At the same time, SEC Chairman Gary Gensler has repeatedly said that bitcoin is not a security. The U.S. Commodity Futures Trading Commission already treats bitcoin as a commodity similar to gold.
After the SEC approved spot bitcoin exchange-traded funds (ETFs) in January, the notion spread that bitcoin would not collapse like some other more volatile cryptocurrencies have, leading to an influx in capital from institutional and retail investors.
Bitcoin’s share of the entire crypto market was below 40% in 2022 but had risen to almost 54% as of Wednesday. According to a survey conducted by exchange operator Bybit from July 2023 to January, bitcoin and Ethereum accounted for 80% of the cryptocurrencies held by institutional investors.
After the SEC approved spot bitcoin exchange-traded funds (ETFs) in January, the notion spread that bitcoin would not collapse like some other more volatile cryptocurrencies have, leading to an influx in capital from institutional and retail investors.
Bitcoin’s share of the entire crypto market was below 40% in 2022 but had risen to almost 54% as of Wednesday. According to a survey conducted by exchange operator Bybit from July 2023 to January, bitcoin and Ethereum accounted for 80% of the cryptocurrencies held by institutional investors.
Bitcoin has seen an increase in demand as a safe haven asset as well. By design, bitcoin has a cap on the total amount that can be issued, similar to a commodity like gold, which has limited reserves.
They are also similar in their price fluctuations and the fact that the process of generating the coin using computers is called mining and incurs costs, leading to bitcoin sometimes being called “digital gold.”
Bitcoin has no issuers or administrators, and the fact that no one can cancel or withdraw it from the market is the basis for the trust that gives it value.
Cryptocurrencies offer an alternative for those seeking assets “separate and apart from the day-to-day workings of governments,” former U.S. Treasury Secretary Lawrence Summers said in May 2021. “My guess is that crypto is here to stay, and probably here to stay as a kind of digital gold.”
Financial inclusion, the idea that financial services necessary for economic activity should be available to all people, has underpinned the wider adoption of bitcoin and contributed to the recent rally. There were 296 million bitcoin holders worldwide at the end of 2023, up 74 million from the beginning of the year, according to trading platform Crypto.com.
Many people in developing regions like Africa and Central America do not have bank accounts, making bitcoin a popular method of payments or sending money.
Bitcoin, which was created in 2009, has reached a market value of $1.35 trillion in just over 15 years. “The sheer size of this number is proof that people around the world see trust and value in it,” said Genki Oda, chairman of the Japan Virtual Currency Exchange Association.
However, cryptocurrencies do not generate cash flow like stocks or real estate, so assessing their appropriate value is difficult. As a result, it is easy for speculative money to sway the market.
