Bitcoin just hit a record high, soaring above $69,000 for the first time since November 2021. This surge comes as demand for the cryptocurrency has spiked in recent weeks, following the approval of spot bitcoin ETFs in the U.S. and the upcoming bitcoin halving event in late April.

In March alone, Bitcoin has jumped by over 60%, and it’s up about 205% for the year, according to CoinMarketCap. The total value of all cryptocurrencies combined has also risen by 18% to $2.55 trillion, with Bitcoin making up over half of that.

The timing of this new high is significant, as it comes just before the scheduled bitcoin halving event in mid-April. This event, which occurs roughly every four years, reduces the rate at which new bitcoins are created. It’s designed to control the supply of bitcoin over time, with the ultimate goal of reaching a total supply of 21 million bitcoins. The last halving isn’t expected to happen for more than a century.

Historically, bitcoin halving have led to increased interest in the cryptocurrency, as demand typically outpaces supply, leading to price increases in the months following the event.

The recent surge in price is also attributed to the approval of 11 spot bitcoin ETFs by the U.S. Securities and Exchange Commission in January. These ETFs have attracted both institutional and retail investors, with institutional demand exceeding initial expectations. The total market capitalization of spot bitcoin ETFs now stands at $53.74 billion, with a 24-hour trading volume of $1.81 billion.

Additionally, data shows that ETFs are purchasing more bitcoins than miners are producing, indicating significant demand for the cryptocurrency among investors.

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On Monday, cryptocurrency prices hit new lows as a result of regulatory worries and a general investor reluctance to engage in risky assets due to impending interest rate increases. The market value of Bitcoin, the largest cryptocurrency, dropped roughly 5% to a three-month low of $18,387.

The second-largest cryptocurrency, ether, fell 3% to a two-month low of $1,285 and has lost more than 10% of its value in the previous 24 hours. The majority of the smaller tokens had larger losses. Over the weekend, a significant upgrade to the Ethereum blockchain—which supports the ether token—called the Merge changed how transactions are handled and reduced energy consumption.

The value of the token has decreased amid rumours that comments made last week by Gary Gensler, chairman of the US Securities and Exchange Commission, suggested the new structure would draw additional regulation. The upgrades’ surrounding trades were likewise unwound.

The regulatory outlook is guesswork, according to Matthew Dibb, COO of Singapore’s Stack Funds cryptocurrency platform. Since the Merge, the markets have shed a lot of their excitement, he claimed. Given the uneasy global backdrop, he continued, “It’s really been a sell-the-news type of event,” and predicted that ether would test $950 in the near future.

“From a fundamental and technical standpoint, the current situation does not look promising. There isn’t a clear quick positive catalyst that will support these markets and inject a tonne of fresh cash and liquidity, in our opinion.

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An affiliate of the company behind collapsed stablecoin TerraUST said on Monday it had spent the bulk of its reserves trying to defend its dollar peg last week, and would use the remainder to try to compensate some users who had lost out.

The token’s crash last week sent cryptocurrencies tumbling, a slide which resumed on Monday, as bitcoin gave up the gains it had eked out over the weekend The world’s largest cryptocurrency fell 5 per cent to around $29,700 on Monday in Asian trade, sliding alongside stocks because of worries about high inflation and rising interest rates.

Bitcoin has lost around one-fifth of its value so far this month, as the spectacular collapse of TerraUST, which is meant to be pegged 1:1 to the dollar but currently trading around 14 cents, roiled crypto markets.

Luna Foundation Guard (LFG), a Singapore-based non profit designed to defend TerraUST, said on Twitter on Monday it would use its remaining assets to compensate remaining users of the so-called stablecoin, starting with the smallest holders, though it had yet to decide the best method of doing so.

The organisation had built up a large reserve including over 80,000 bitcoin and millions of dollars worth of other stablecoins to support TerraUST, the majority of which it said it had spent trying to prop up the token last week. LFG had initially pledged to raise a reserve $10 billion in bitcoin. The reserve was down to 313 bitcoin as well as other assets as of now, it tweeted.

Regulators eye crypto

The incident has drawn particular attention, including from financial regulators, to stablecoins and the role they play in the cryptosystem as the main medium for moving money between cryptocurrencies or for converting balances to fiat cash.

Bank of France Governor Francois Villeroy de Galhau told a conference crypto assets could disrupt the international financial system if they were not regulated and made interoperable in a consistent and appropriate manner across jurisdictions. He pointed to stablecoins, which he said were somewhat misnamed, as among the sources of risk.

Speaking separately, Fabio Panetta, a member of the executive board of the European Central Bank, also said on Monday that stablecoins were vulnerable to runs. Tether, the world’s largest stablecoin, briefly lost its 1:1 peg on May 12, before recovering. Unlike TerraUST, Tether is backed by reserves in traditional assets, according to its operating company.

On the same day, bitcoin dropped as far as $25,400, its lowest level since December 2020, but recovered to as high as $31,400 on Sunday. Ether, the second-largest cryptocurrency, fell 5.6pc to around $2,000 on Monday. Regulators elsewhere are also concerned.The US Federal Reserve warned last week that stablecoins were vulnerable to investor runs because they were backed by assets that could lose value or become illiquid in times of market stress.

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Today in El Salvador, delegates from Pakistan and 43 other countries convened to discuss Bitcoin adoption and other concerns relating to the digital economic framework.

International media outlets reported on Tuesday that officials from each country’s financial institutions and central banks attended the meeting.El Salvador’s President, Nayib Bukele, announced on Twitter earlier this week that 32 central banks and 12 financial agencies will meet this week to examine Bitcoin and its potential adoption as a new form of currency.

Late Sunday night, Nayib Bukele announced on Twitter that on Monday, May 16, 32 central banks and 12 financial authorities from 44 countries will meet to discuss financial inclusion, the digital economy, banking the unbanked, and El Salvador’s Bitcoin rollout.

In a series of tweets, the president announced that the State Bank of Pakistan (SBP), Central Bank of So Tomé and Principe, the Central Bank of Paraguay, the National Bank of Angola, the Bank of Ghana, the Bank of Namibia, the Bank of Uganda, the Central Bank of the Republic of Guinea, the Central Bank of Madagascar, the Bank of the Republic of Haiti, and the Bank of the Republic of Burundi, the Central Bank of Eswatini and its Ministry of Finance, the Central Bank of Jordan, Central Bank of The Gambia, National Committee of Banks and Seguros of Honduras, Directorate General of Treasury, Ministry of Finance and Budget, Madagascar, and the Maldives Monetary Authority will be attending the meeting.

The meeting also included representatives from the National Bank of Rwanda, Nepal Rastra Bank, Kenya’s Sacco Societies Regulatory Authority (SASRA), Costa Rica’s General Superintendency of Financial Entities, Ecuador’s Superintendence of the Popular and Solidarity Economy, and El Salvador’s Central Bank.

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According to the Financial Times, the creator of cryptocurrency exchange FTX believes bitcoin has no future as a payment network and has attacked the digital currency for its inefficiency and huge environmental costs.

The “proof of stake” network is an alternative to the system, in which players purchase tokens that allow them to join the network. They can mine more tokens the more they hold.  “Proof of stake” networks, according to FTX Founder and Chief Executive Sam Bankman-Fried, will be essential to evolve crypto as a payments network because they are cheaper and less power hungry.

Ethereum, the second-largest cryptocurrency behind bitcoin, has been attempting to migrate to this energy-intensive network. According to the report, Bankman-Fried also stated that bitcoin did not have to become a cryptocurrency and that it might still have a future as “an asset, a commodity, and a store of value” like gold.

Following the collapse of TerraUSD, a so-called stablecoin, Bitcoin fell to its lowest level since December 2020 last week. According to Forbes, Bankman-Fried is worth $21 billion, while FTX, which he co-founded in 2019, was valued at $32 billion in a February investment round.

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Bitcoin fell to its lowest level since July 2021 on Monday as slumping equity markets continued to hurt cryptocurrencies, which are currently trading in line with so-called riskier assets like tech stocks. Bitcoin dropped to as low as $32,763.16 shortly before 1100 GMT, in its fifth consecutive session of falling.

The cryptocurrency has dropped 13 per cent so far in May and has lost more than half its value since it hit an all-time high of $69,000 in November last year.

“I think everything within crypto is still classed as a risk asset, and similar to what we’ve seen with the Nasdaq, most cryptocurrencies are getting pummelled,” said Matt Dibb, COO of Singapore-based crypto platform Stack Funds.

The tech-heavy Nasdaq fell 1.5pc last week and has lost 22pc year to date, hurt by the prospect of persistent inflation forcing the US Federal Reserve to hike rates despite slowing growth. Nasdaq futures were down a further 2.3pc on Monday.

Dibb said other factors in the decline over the weekend — Bitcoin closed on Friday around $36,000 — were the cryptomarket’s notoriously low liquidity over the weekends, and also short-lived fears that the algorithmic stablecoin called Terra USD (UST) could lose its peg to the dollar. Stablecoins are digital tokens pegged to other traditional assets, often the US dollar.

UST is closely watched by the crypto community both because of the novel way in which it maintains its 1:1 dollar peg, and because its founders have set out plans to build a reserve of $10 billion worth of bitcoin to back the stablecoin, meaning volatility in UST could potentially spill over into bitcoin markets.

Ether, the world’s second-largest cryptocurrency, which underpins the Ethereum network, fell as low as $2,360 on Monday, its lowest since late February.

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Tesla Inc, Block Inc, and Blockstream Corp, a blockchain company, will work in Texas to mine bitcoin using solar power, Blockstream CEO Adam Back announced on Friday.

Tesla is providing the solar power infrastructure as well as its Megapack batteries, according to Back. Blockstream and Block, formerly known as Square, announced in June that they were working together to develop an open-source, solar-powered bitcoin mining facility in the United States.

Bitcoin is created when powerful computers compete against each other to solve complicated mathematical riddles, a time-consuming process that currently relies heavily on fossil fuels.

Tesla stopped taking bitcoin for car purchases in May of last year due to environmental concerns related to bitcoin mining.

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