Bitcoin, the cryptocurrency synonymous with startup riches, valuation roller coasters and massive fraud, hit a new all-time high on Tuesday — above $69,000 — beating a previous peak from November 2021. The rally pushed bitcoin’s price up more than 300% from lows of less than $17,000 a little over a year ago.
The remarkable rise to new heights from a stunning market meltdown appears to be driven by several factors, including increased support from Wall Street brokerages and concerns about the broader economy.
All that doesn’t change the fact that cryptocurrencies are risky investments. If you plan to venture into bitcoin, CNET recommends that at most you invest 5% of your portfolio. And be ready to potentially lose it all. Don’t invest before paying down high-interest credit card debt or building an emergency fund.
“Folks have to really treat it like gambling, essentially,” said Jannese Torres, whose Yo Quiero Dinero podcast focuses on personal finance and has discussed crypto investing. “I like to preface the whole conversation by saying this is a very speculative investment, and I use ‘investment’ in quotes.”
Still, Torres has money invested in crypto, but it represents less than 1% of her total portfolio. “Definitely don’t go investing your emergency fund thinking that you’re going to come upon some windfall,” she said. “That’s very risky.”
What’s driving this surge
The global crypto market is massive, with more than $2.5 trillion in reported assets, according to industry watcher coinmarketcap.com. Hundreds of billions of dollars in trades flow through the system on any given day. That said, a couple of factors are likely playing into this recent jump in value.
ETF mania gripping crypto
One of the biggest catalysts of bitcoin’s price rise appears to have come in January, when Wall Street investors were given new ways to invest in crypto through Exchange Traded Funds, or ETFs. Think of them as mutual funds that invest in a bunch of different crypto-related assets.
The US Securities and Exchange Commission approved the first bitcoin-related ETF back in 2021, a time when crypto mania seemed to be everywhere. But that ETF was a wonky financial instrument and not a true investment.
In January, the SEC approved a new group of bitcoin ETFs that would allow investors to buy bitcoin as easily as stocks or mutual funds, effectively for the first time.
As The Wall Street Journal explained when the ETFs were approved, until now, everyday investors who wanted to buy into crypto had to either trade on pricey crypto exchanges or invest in wonky financial products. The industry hailed the decision as “a game changer,” according to the newspaper, and sure enough, bitcoin has surged more than 50% since then.
Gold and the economy
Another interesting data point relative to this crypto jump is that the value of gold has also risen to new all-time highs. Market watchers at Reuters believe investors are buying up gold amid weaker US economic data, fears of a stock market correction and expectations of changing interest rates.
Bitcoin crash, rise, crash again, rise again
An important part of bitcoin’s history is how often it’s risen and crashed over the years. It’s often referred to as a roller coaster, and there’s a good reason why.
Over the past four years, bitcoin’s price has doubled, halved, more than doubled, more than halved and so on. Bitcoin was valued below $20,000 at the end of 2020, then jumped to more than $67,000 by the end of 2021. In June 2022, it crashed below $18,000. Now it’s trading near all-time highs.
The most recent crash, known as a “crypto winter,” also exposed high-profile multibillion-dollar scams, including the one involving trading platform FTX, which at one point was missing $8 billion in funds.
Also, in the next few months bitcoin is expected to go through a “halving,” a process that happens every four years or so. This reduces the supply of new bitcoins created and potentially pushes up the price, CNBC reported.
Be wary
No question, the world of bitcoin investing is an extremely volatile one, filled with scams and schemes.
CoinMarketCap offers a data point on its website called the Fear and Greed Index, utilizing crypto prices and user behavior to attempt to track the emotional state of investors. Currently, CoinMarketCap says its index is tipped to “Extreme greed.”
If you still want to invest, CNET has a lot of resources to help get you started. But consider yourself warned.