This article originally appeared on Business Insider.
Bitcoin is on a sustained rally to levels last seen when interest rates were near zero and pixelated works of art regularly sold for millions.
On Monday, bitcoin rose more than 5% to above $66,000 for the first time in nearly three years. It is within reach of its all-time high of $69,000. Ether, solana, dogecoin and other tokens are also holding demonstrations. In February, the cryptocurrency market value returned to $2 trillion for the first time since April 2022.
This new test of highs comes against headwinds from interest rates that could remain higher for a longer period. Markets have dismissed rate cut forecasts as inflation persists and the economy shows few signs of weakening.
Last time around, the rally was driven by low interest rates that encouraged speculative behavior. When the Federal Reserve began raising rates to contain high inflation, the momentum ran out and Bitcoin plummeted to $16,000 less than a year after hitting records.
Now cryptocurrencies are rising at still high rates and without a clear path down.
What does it give?
“Even though Fed rate cut expectations have been pushed back, the threat of rate hikes is off the table for now,” Larry Tentarelli, chief technical strategist at Blue Chip Daily, told Business Insider, adding: “So bitcoin he recovered.”
There is also a supply-demand imbalance that appears to outweigh political concerns.
A series of bitcoin ETF approvals has fueled demand and retail interest, as markets prepare for bitcoin’s halving event that will reduce the reward for miners and halve the volume issued daily.
The halving occurs approximately once every four years, with events in 2020, 2016 and 2012. In the 12 months following the previous three halvings, bitcoin increased by 8,069%, 284% and 559%. The event puts pressure on supply as it slows the rate at which new bitcoins enter the market, and this year’s halving will come at a time when demand is surging.
Tentarelli and other market professionals have highlighted the emergence of bitcoin ETFs as a “huge” driver of cryptocurrency demand, as the products allow more investors to gain exposure without purchasing tokens outright.
Data from CoinShares released on Monday indicates that digital investment products saw their second-largest weekly inflows on record last week, at $1.84 billion. 94% of these inflows moved towards bitcoin products. In the same period, trading volumes of investment products reached a record of over 30 billion dollars.
ETFs from Wall Street titans like BlackRock and Fidelity invest directly in bitcoin and are increasingly hoarding the available supply.
A CoinDesk report from February, the month after the ETF was approved, said the 11 funds held 192,000 bitcoin. This figure is separate from the 420,000 held by Grayscale, which converted its bitcoin trust into an ETF, and the nearly 200,000 held by MicroStrategy.
Standard Chartered predicted that ETF inflows could help push the price of bitcoin to $200,000. Fundstrat’s Tom Lee has an even more bullish forecast, saying the cryptocurrency could reach $500,000.
“There’s limited supply and now we have a potentially huge increase in demand” with the approval of the spot bitcoin ETF, Lee said in a recent interview, “so I think in five years something around half a million would potentially be achievable.”