- On 5 March bitcoin rose above its November 2021 all-time high for the first time, above $69,000.
- The push came from inflows into the new exchange-traded funds, and gold was also setting records.
- Volatility remained: a price that rises quickly can also fall quickly, and it is worth deciding in advance how much one is willing to expose.
On 5 March 2024, bitcoin rose above its November 2021 all-time high for the first time, above $69,000. The push came from inflows of money into the new exchange-traded funds, approved weeks earlier, while gold was also setting records. For the asset, it was the end of a long period in which the price had stayed below that ceiling.
All-time highs attract the attention of the public, the media and those who had not previously paid attention to the asset. That attention is understandable, but it is also a risk: decisions taken on the emotion of a headline tend to be worse than those taken with a plan. This note is general information, not investment advice; its aim is to give context for understanding what happened.
An all-time high
Crossing that level closed a long wait. Inflows into the new exchange-traded funds explained much of the move, and gold was also setting records in those same weeks. That two assets of such different nature reached highs almost at once suggested a context of search for safety and abundant liquidity in markets. That is an interpretation, not a certainty, and each observer may reach a different conclusion.
It is wise, however, to be cautious in interpreting a high. A record describes a price level, not the quality of an investment nor the probability that the price will keep rising. Anyone who bought at the previous high and waited more than two years to recover its value knows that ceilings can take a long time to surpass, and that the road to them can be winding.
A different investor
After the crypto winter of 2022, the asset was back at record highs with a different investor profile: more institutional, and with regulated products in between. Who buys changes, but not necessarily how the price behaves. Large managers and supervised institutions bring volume and structure, but they do not remove the speculative nature of an asset whose value depends on the confidence of its buyers. In practice, the size of inflows can amplify rises and falls alike.
That greater institutional presence has advantages, such as access to transparent, supervised products, and also implications, such as greater synchronisation with the rest of the financial markets. In moments of tension, large investors may reduce risk across the board, and that also affects bitcoin. Understanding this relationship avoids the idea that it is an asset wholly independent of what happens in the rest of the economy.
The risk is still there
Volatility remained: a recovery does not change the nature of the risk. A price that rises quickly can also fall quickly. It is worth deciding in advance what part of one’s wealth one is willing to expose to such an asset, and not revisiting that decision at the pace of the quotes, because the temptation to raise the stake after a rise, or abandon it after a fall, tends to cost money. Changes of mind based on the day’s price are rarely a good guide.
A prudent approach is to define what role the asset would play in the overall estate, what loss could be borne without upsetting life plans and how long the position can be held without needing that money. Discussing it with an adviser, rather than with the emotion of the moment, helps make decisions consistent with one’s personal situation. Patience, in this field, is a form of discipline.
An all-time high is a data point, not a reason.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
