Bitcoin set for biggest monthly jump since 2020 amid ETF boost

FILE PHOTO: A bitcoin is seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, June 23, 2017. REUTERS/Benoit Tessier/File Photo

SINGAPORE/LONDON (Reuters) - Bitcoin was on track for its biggest monthly gain in more than three years on Thursday and within sight of a record high, propelled by cash rushing into exchange-traded funds.

The approval and launch of spot bitcoin exchange-traded funds in the U.S. this year has opened the asset class to new investors and reignited the excitement that evaporated when prices collapsed in the "crypto winter" of 2022.

The largest cryptocurrency by market capitalisation was last up 3.4% at $62,205, having changed hands at $63,933 overnight, the highest since late 2021.

Bitcoin's monthly gain is more than 47%, its largest since December 2020, and its rally has pulled ether along in its wake. The smaller cryptocurrency topped $3,500 for the first time since April 2022 on Wednesday and was last up 4.3% at $3,466, taking its February increase to 52%.

The momentum in bitcoin suggested "a test and likely break" of $69,000, said Tony Sycamore, an analyst at brokerage IG Markets. That would put bitcoin beyond its record high set in the heady days of crypto peaks in November 2021.

"If this were any other market, it would likely be in the 'blow-off top - don't go near that bubble' category," said Matt Simpson, senior market analyst at City Index.

"But bitcoin is back in its parabolic-rally phase, with no immediate signs of a top."

The head of Coinbase Global said the exchange was dealing with a surge in traffic and LSEG data shows around $612 million flowed into the 10 largest spot bitcoin ETFs on Wednesday, the most since Feb 14.

BlackRock's iShares bitcoin trust was the major beneficiary, with $550 million in flows - the most in a single day to the fund since its inception in January.

Traders have also poured into bitcoin ahead of April's halving event, a process that takes place every four years in which the rate at which tokens are released is cut in half, along with the rewards given to miners.

Supply of bitcoin is limited to 21 million, of which 19 million have already been mined.

In addition, the prospect of the U.S. Federal Reserve delivering a series of interest rate cuts this year has lowered the yields available on bonds and boosted investor appetite for riskier assets, including fast-growing tech stocks.

"Rate cuts matter," said Geoff Kendrick, head of crypto research at Standard Chartered, "If you can get higher returns elsewhere, Treasury yields are higher, then you're comparing that against what you can earn from bitcoin".

Kendrick said the health of the U.S. economy and the inflows into bitcoin funds have been more important factors.

"The ETF inflows have been huge," he added.

(Reporting by Tom Westbrook, Ankur Banerjee and Harry Robertson; additional reporting by Amanda Cooper; Editing by Himani Sarkar, Shri Navaratnam and Alexander Smith)

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