Why is the price of bitcoin hitting a record high? Experts explain.
Bitcoin vaulted to a record high on Monday, climbing more than 1% in early trading and hurtling past $120,000 for the first time.
The surge comes as the U.S. House of Representatives stands poised for “crypto week,” a series of debates over the coming days on legislation that could ease regulatory complexity long viewed as an impediment for the industry.
The price of bitcoin clocked in at $120,290, amounting to a nearly 15% surge over the past month as crypto-friendly legislation made its way through Congress and investors displayed growing adoption of a new tool for investment in bitcoin.
Ether, the second-largest cryptocurrency, also climbed 1% on Monday. Solana, another popular cryptocurrency, climbed 2%.
Analysts who spoke with ABC News attributed the surge to signals of a continued government posture friendly toward crypto as well as the growing adoption of a new tool for investment in bitcoin.
The rise in price also owes to a steadily approaching limit in the supply of bitcoin, which means heightened demand has outpaced the release of new bitcoins, some analysts previously told ABC News. Some observers question the role of bitcoin's limited supply, since they believe the long-known feature of bitcoin's architecture has already been factored into the asset's price.
The House is set to take up the GENIUS Act, an industry-backed measure establishing rules targeting stablecoins, which are a type of cryptocurrency pegged to the value of another asset, often the U.S. dollar.
Supporters of the GENIUS Act applaud the measure as a first-of-its-kind effort to formalize a key segment of the cryptocurrency industry, offering safeguards for consumers, allowing entry for conventional financial firms and growing the digital currency market.
Critics of the measure, however, say it amounts to an industry-friendly set of weak regulations that fail to adequately protect consumers and police illicit trading of stablecoins.
Members of the House will also debate a measure that could clarify the federal government’s regulatory posture toward crypto, as well as another bill that would prohibit the Federal Reserve from issuing its own digital asset.
Bryan Armour, the director of passive strategies research at financial firm Morningstar, said the policy blitz in the House marks the latest in a string of positive developments for crypto in Washington, D.C., since President Donald Trump’s election victory in November.
Since the presidential election, the price of bitcoin has soared nearly 80%.
“Crypto week,” Armour said, foretells the “continuation of broader crypto policy” under the Trump administration.
Trump’s business dealings in cryptocurrency have raised concerns among some observers about a potential conflict of interest.
In March, Trump-backed crypto firm World Liberty Financial issued a stablecoin USD1. An Abu Dahbi-based investment firm last month used the stablecoin to make a $2 billion investment in crypto exchange Binance, putting Trump’s company in a position to profit from the deal. Trump has denied any wrongdoing.
Trump has yet to release his financial disclosures as president, so it's unclear what arrangements he has made to ensure a firewall between his personal businesses and his presidency. A White House spokesperson told Reuters in April that "President Trump's assets are in a trust managed by his children. There are no conflicts of interest."
Crypto gains over recent months have also been propelled in part by U.S. approval last year of Bitcoin ETFs, or Exchange-Traded Funds.
Bitcoin ETFs allow investors to buy into an asset that tracks the price movement of bitcoin, while avoiding the inconvenience and risk of purchasing the crypto coin itself.
Top investment firms like Fidelity and Franklin Templeton offer bitcoin ETFs, making it easier for investors to pour funds into the world’s largest cryptocurrency. As demand has grown, analysts said, the price of bitcoin has climbed.
A rush of investment into Bitcoin ETFs in recent days sent the combined asset value of such investment vehicles to a record high of more than $158 billion, according to The Block, an outlet that covers digital assets. Investors placed more than a billion dollars into Bitcoin ETFs on consecutive days last week, The Block found.
“Since the U.S. approval of bitcoin ETFs, we’ve seen institutional adoption of bitcoin,” Nikhil Bhatia, a professor of finance and business economics at the University of Southern California who studies cryptocurrency, told ABC News.
The run-up to bitcoin ETF approval in fall 2023, Bhatia added, was when bitcoin “got back into bull market mode.”
While policy conditions and new investment tools bode well for bitcoin, the precise reasons for the recent surge remain difficult to pin down, some analysts told ABC News.
Digital currencies lack an underlying value beyond the price set by the ebb and flow of investor demand, contrasting the assets with stock prices determined in part by expectations of future profits, Bryan Routledge, a professor of finance at Carnegie Mellon University's Tepper School of Business, told ABC News.
“Bitcoin prices have always been puzzling in a sense,” Routledge added. “It begs the question: ‘Why now?’ I don’t know what the new information is.”
