Bitcoin is on a tear.
The largest cryptocurrency has surged more than 20% in the past four days, hitting an all-time high. In contrast, the S&P 500 has declined slightly over that period.
On Wednesday, the price of Bitcoin exceeded $64,000 for the first time since November 2021.
The surge was fueled by an explosion of investment in bitcoin ETFs, a new investment vehicle approved by the Securities and Exchange Commission last month, analysts told ABC News. That initial burst of gains, they added, triggered a run by investors fearing a loss in returns.
“It’s been a wild ride,” Katie Stockton, founder of market research firm Fairlead Strategy, told ABC News.
Bitcoin ETFs (Exchange-Traded Funds) allow investors to buy into an asset that tracks bitcoin’s price movements, while avoiding the inconvenience and risk of buying cryptocurrency coins.
For example, ETFs for gold allow individuals and institutions to invest in the price movement of the precious metal instead of buying, transporting and storing the physical commodity.
A Bitcoin ETF, in turn, gives investors access to the cryptocurrency market without facing the technical hurdles and fees associated with navigating a crypto exchange.
After the SEC approved the new investment option, bitcoin ETFs became available, including offerings from legacy firms such as Fidelity and Franklin Templeton.
The new crypto options brought in billions of dollars in investment within weeks, Brian Armor, director of passive strategy research at financial firm Morningstar, told ABC News. Nine major bitcoin ETFs have received a combined $10 billion since last month, Armor said.
“There have been very successful launches for all of these ETFs,” Armor said. “For seven weeks on the market it’s crazy.”
When investors put their money into bitcoin ETFs, the fund buys bitcoins, increasing demand for the cryptocurrency and potentially driving up prices, Armor added.
Since bitcoin ETFs gained approval on January 10, the price of bitcoin has skyrocketed 30%.
“There has been significant business volume,” Armor said.
Fairlead Strategies’ Stockton said the rally in recent weeks has sparked an additional wave of investment as traders see the initial price rally and look to jump on board.
For more than a week in mid-February, bitcoin’s price hovered in a “tight range” around $51,000, Stockton said, when it broke that threshold on Monday, a new high fueling optimism and investment criticism.
“The run-up we’ve seen over the last four days has been really explosive,” Stockton said.
Despite the alarming pace of gains in recent weeks, some analysts cautioned about bitcoin’s past volatility and the possibility of an impending price plateau, or downswing.
In the immediate aftermath of the bitcoin ETF approval, for example, the price of bitcoin fell 15% before rebounding, Armor said. Over the past five years, he added, bitcoin has fallen more than 40% on four separate occasions.
“Investors can expect it to either increase substantially or halve,” Armor said. “Anything can happen.”
James Butterfill, head of research at digital asset management firm CoinShares, acknowledged concerns about bitcoin’s rapid price rise, but also pointed to reasons for optimism.
“When you see prices go up dramatically, it always makes you a little bit nervous,” Butterfill told ABC News. “Is it sustainable?”
However, Butterfill notes that price increases have coincided with periods of stubbornly high interest rates, suggesting that the boom in demand has little for a lot of cash looking for a place to land.
“It’s not a wild guess,” Butterfill said. “There’s a real demand for it.”
