Written by Amanda Cooper and Alun John
LONDON (Reuters) – Bitcoin rose 5% on Friday to its highest level in a month, supported by what analysts said was a buying spree ahead of the April halving event and as outflows from exchange-traded funds slowed recently.
The price rose to a session peak of $47,705, the highest level since January, after the first products traded on a US-listed bitcoin spot exchange received regulatory approval.
The world's largest cryptocurrency last rose 3.5% to $46,946, and is set to rise 10% this week, its biggest rise in a week since October. Ethereum rose 2.5% to $2,486.
Bitcoin reached a two-year high above $49,000 in January, but has since trended lower, under pressure from a “news selling” wave of profit-taking after the Securities and Exchange Commission finally approved ETFs.
The decline in bitcoin has been the opposite of other financial markets in recent weeks, with stocks, bonds and gold rising on expectations that global central banks will turn to lower interest rates this spring.
Since then, policymakers have pushed back and economic data has not supported the view that interest rates should fall anytime soon, but risk assets such as stocks have risen, with Bitcoin resuming its march higher.
Analysts said the jump in prices on Friday was a result of a slowdown in recent ETF outflows and an explosion in pre-halving buying in April.
“With bitcoin back to $46,000 this morning, traders are clearly gearing up for the highly anticipated halving event scheduled in about two months,” said Joshua Mahoney, senior market analyst at Scope Markets.
The next halving is expected to take place in April, a process designed to slow the issuance of bitcoin, which has a maximum supply of 21 million — of which 19 million have already been mined — by halving the token production reward.
“If historical trends continue to hold, traders will be hoping to see a boom in 2024 given the previous pattern of outperformance post-halving,” Mahoney said.
Bitcoin prices typically rise after halvings. Six months after the first halving in 2012, the price jumped to $126 from $12. After the second halving in 2016, it rose to $1,000 from $654 within seven months and in 2020 it rose to $18,040 from $8,570 in the same time period.
Furthermore, according to Markus Thelen, founder of digital asset research firm 10x Research, Bitcoin also tends to perform during US election years, coinciding with the 2012, 2016 and 2020 halving cycles.
Some ETF outflows have eased, particularly from the Grayscale Bitcoin ETF, the largest by assets, which supports spot cryptocurrency prices, QCP Capital said in a note on Thursday.
“Total inflows across all BTC ETFs are now positive,” QCP said.
When the SEC approved the listing of ETFs in January, Grayscale, whose existing Bitcoin fund had been converted into an ETF at the time, bled $2.7 billion in outflows in the first week after that, as early investors rushed To take profits, according to LSEG Lipper data.
Outflows slowed the following week to $1.5 billion, then slowed to $701 million in the week ending February 7.
Scope Markets' Mahoney noted that the recent rise in the dollar has been a drag on cryptocurrencies recently, but the impact is likely to diminish.
(Reporting by Medha Singh in Bangalore; Editing by Harry Robertson and Alison Williams)
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