The cryptocurrency market is on fire, with Bitcoin reaching new record highs one after another. On Monday, it broke through the $72,700 mark, fueled by the approval of spot Bitcoin ETFs. However, this surge is also attributed to the upcoming “halving” event, which will limit the supply of new Bitcoins released into circulation by miners.
In the past seven days alone, Bitcoin has seen a 9.5% increase and a 50% surge in the month, according to data from CoinMarketCap. The total market cap of all cryptocurrencies has also risen by 10% to reach a staggering $2.71 trillion, with Bitcoin making up 52.7% of that amount.
While the crypto frenzy is in full swing, it’s impossible to predict just how high Bitcoin can climb. As investors ride on the wave of optimism, there are indications that the market may be nearing its peak, with potential price dips on the horizon.
The CoinMarketCap Crypto Fear & Greed Index currently sits at an alarming 89.12 points, soaring from a neutral 59.3 points in early February. This index uses a combination of price and trading data and user behavior to measure the sentiment of the crypto market on a scale of 0-100. An index closer to zero suggests investors have sold their positions irrationally, while a value closer to 100 indicates a possible correction in the market.
Despite this warning, it’s clear that Bitcoin remains the star of the show for both retail and institutional investors. According to CoinShares’ Digital Asset Fund Flows Weekly Report, there were inflows of $2.6 billion into Bitcoin last week and $9.9 billion year-to-date. Meanwhile, Ether, the second largest cryptocurrency, has yet to benefit from the enthusiasm surrounding Bitcoin. Its inflows last week were a meager $2.1 million, although it has seen a substantial increase of $135 million since the start of the year.
As Bitcoin’s value continues to skyrocket in anticipation of the upcoming halving event, which occurs every four years and is slated for mid-April, it’s important to remember that what goes up must come down. In the past, halvings have caused a surge in demand and pricing for Bitcoin, only to be followed by a significant drop in value. This pattern was evident during the last halving on May 11, 2020, when Bitcoin’s price soared by 600% from $9,000 to $63,000 by April 2021, before crashing by 50% in just three months, signaling another round of volatility for the asset.
