Bitcoin continues to smash record prices as crypto inflows soar

Bitcoin (BTC) continues its remarkable surge, propelled by an influx of capital pouring into cryptocurrency products and the impending reduction in the token's supply growth.

The original cryptocurrency soared to an unprecedented high of nearly $72,900 on Monday and continues to trade around the $72,000 mark as of the time of writing on Tuesday. According to a report from CoinShares International Ltd., a record $2.7 billion flooded into crypto assets last week, predominantly directed towards Bitcoin, which has surged by approximately 70% this year—and we're still not through the first quarter.

Institutional demand propels Bitcoin to new highs

While plenty of retail traders have had the opportunity to make their fortunes in the bull market or may be holding on for even better conditions, the recent momentum is largely attributed to major institutional players.

After the success of spot Bitcoin exchange-traded funds (ETFs), which were launched in the US this January, ETFs from major players like BlackRock Inc. and Fidelity Investments have attracted a net inflow of about $9.5 billion to date and hit over $110 billion in trading volume. 

James Seyffart, an ETF analyst at Bloomberg, pointed out that the combined assets under management (AUM) for five US spot Bitcoin ETFs have surpassed $2 billion, with Bitwise's BITB fund being the latest entrant into this group of funds focused on cryptocurrency-native assets.

Outside of the US, other developments are demonstrating a crypto-friendly mood in global markets. For example, the London Stock Exchange now accepts applications for Bitcoin and Ethereum (ETH) exchange-traded notes. Thailand's regulatory authorities have also signalled the opening of overseas crypto ETFs to retail buyers, further fuelling investor interest.

Even after Bitcoin hit a new all-time high, there have been signs that the feeding frenzy from the big fish isn't over yet. In the derivatives market, open interest at Chicago-based CME Group's Bitcoin futures market hit a new peak, exceeding 30,000 for the first time on Monday. This surge indicates increased US institutional demand for exposure to crypto-related assets.

MicroStrategy keeps buying BTC at high prices, Trump and Ackman ponder crypto

One institutional investor that appears confident that the Bitcoin bull run is just beginning is MicroStrategy, which revealed its plans to issue a fresh series of convertible notes on 6 March, coinciding with Bitcoin's record-high price of $71,927. The private offering, which was concluded on 9 March, saw the company sell convertible notes valued at $800 million. Michael Saylor, the firm's founder and executive chairman, disclosed on social media platform X that proceeds from the note offering, along with surplus cash, were utilised to purchase an additional 12,000 Bitcoin at an average price of $68,477 per BTC, bolstering MicroStrategy's total holdings to 205,000 BTC, acquired for $6.91 billion at an average price of $33,706 per coin.

Saylor also had an interesting interaction on X with famous activist investor Bill Ackman. Ackman, founder and CEO of Pershing Square Capital Management, posted the following on the microblogging platform:

"Bitcoin price rise leads to increased mining and greater energy use, driving up the cost of energy, causing inflation to rise and the dollar to decline, driving demand for Bitcoin and increased mining, driving demand for energy, and the cycle continues."

The billionaire hedge fund manager then added:

"Maybe I should buy some Bitcoin. The problem, of course, is that it also works in reverse."

Following this tongue-in-cheek consideration of Bitcoin from someone who had previously steered clear of big crypto investments, MicroStrategy's Michael Saylor stepped in to correct the record and offer advice, writing:

"You should buy some bitcoin, but not for the reasons cited above. Most Bitcoin miners are driving the cost of electricity down for other consumers, not up. Let me know if you would like to discuss 1 on 1."

Another high-profile yet hedged endorsement of Bitcoin came from the mouth of US presidential candidate Donald Trump. Speaking to CNBC on Monday, Trump offered the following: 

"Well, it's taken on its own life, and I do little things sometimes for fun, you know, make money with it. I have fun with it, too." 

While denying that he had bought Bitcoin himself, Trump hinted that he was open to allowing US citizens to conduct BTC transactions by referring to Bitcoin as simply another form of currency. Regardless of Trump's potential crypto activities, the intertwining of finance and politics can only mean that the desires of crypto holders and investors, as individual voters and powerful financial organisations, will be taken more seriously when regulatory decisions are made in the future.

What's next for BTC's price? Spot ETFs and halving may counter corrections

Market analysts foresee the potential for further gains, with projections of Bitcoin pushing toward $80,000 in the coming months thanks to support from institutional inflows and anticipation of a reduction in supply thanks to April's scheduled halving event, which will cut new Bitcoin rewards from mining by 50%.

With the price of Bitcoin being so favourable to hodlers right now, traders should be wary of a correction that would come when significant numbers decide it is time to take profit. Analytics firm CryptoQuant noted that traders' unrealised profit margins have reached 57%, a level historically linked with impending corrections as traders tend to lock in profits over time. Additionally, short-term holders are selling at the highest profit margins since February 2021, indicating a potential rise in selling pressure. 

The impact of spot ETFs on Bitcoin's price patterns shouldn't be underestimated by traders at all levels who are watching for BTC price's next move. Historically, corrections between 20% and 50% after Bitcoin bull runs are not unheard of. However, the buy-side pressure from spot Bitcoin ETFs may limit the scope of corrections and propel prices even higher.

Despite the rally, the pace of new "millionaire wallets" being created daily is lower than during Bitcoin's 2021 bull run, according to crypto analytics firm Kaiko Research. This could be a sign of the much bigger role that institutional investors and custodians are playing in the current bull run as opposed to individuals using their personal wallets. However, expectations of a halving event next month, along with demand from ETFs and supply constraints, continue to fuel a bullish sentiment in the crypto market, which means that this could only be the beginning of a generation of newly minted Bitcoin millionaires.

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