Bitcoin (BTC) Is on the Rise Again, and the Cryptocurrency Is Now Within Shouting Distance of Its All-Time High of $73,780.07 It Set in March 2024. Is This the Start of Another Run? Or Just a Quick Jump That Ended With Yesterday's Sharp Retreat?

Those who have been trading Bitcoin for years know that the cryptocurrency is prone to huge swings in price.

Bitcoin (BTC -3.22%) is once again on the move, and the cryptocurrency is now within shouting distance of its all-time high of $73,780.07 set in March 2024. So is this the start of another massive run?

Or just a quick jump that ended with yesterday's sharp retreat?

Bitcoin has a long history of record runs

Those who have been following Bitcoin for years know that the cryptocurrency is prone to massive price swings. The recent run isn't the first time something like it has happened and hardly the biggest.

In its infancy, Bitcoin had some truly spectacular price runs, like from the end of 2010 through June of 2011 when the cryptocurrency went from roughly $0.30 to nearly $30. The next year, 2012, began with Bitcoin trading around $13. By November it had hit $1,000.

Still, the run-up from late 2023 through the beginning of 2024 was impressive and marked a sharp departure from the poor performance of 2022. In a matter of a few months, Bitcoin had risen from $25,000 to nearly $74,000.

So many factors are at play here, but a few key catalysts likely spurred this last run.

First, while institutional capital had been entering the market for years, the Securities and Exchange Commission approval of spot Bitcoin exchange-traded funds (ETFs) greatly expanded access across Wall Street and retail investors alike. Additional capital flooded in. Blackrock's iShares Bitcoin ETF, for instance, set a record when it passed $10 billion in assets under management (AUM) just seven weeks after launch. The previous record was set by SPDR's Gold Trust, which took two years to reach the same mark.

Additionally, the so-called halving occurred in April. Baked into the Bitcoin algorithm is a feature that reduces the flow of new Bitcoin into the market over time. Every four years, the reward for mining Bitcoin is cut in half until eventually, in the year 2140, no more Bitcoin can be mined.

If we think of the simple relationship between supply and demand, every time this occurs, supply growth is reduced. If demand stays constant or even increases, prices should rise as well. Each of Bitcoin's halvings has been correlated with a big upswing in the asset's price.

Here's what could be happening this time around

The latest jump is no doubt still tied to the previous two factors, but a few more catalysts are at play. In general, things are looking fairly rosy for the broader economy. It's not perfect, but many believe the Federal Reserve is pulling off a soft landing — that is, curbing inflation without choking the economy — putting to bed fears of a recession.

The Fed is likely to continue cutting interest rates, and many believe that regardless of which candidate wins the U.S. presidential election in November, there will be a more crypto-friendly regulatory environment in the near future.

At the same time, many investors are looking to further diversify away from equities, as some believe the next decade will look very different from the last. Goldman Sachs analysts believe the next 10 years will return an average of just 3%, much lower than the historical norm.

Now, take this with a grain of salt; it wouldn't be the first time a prediction like this turns out to be totally wrong, but it's certainly possible. An asset like Bitcoin is a great alternative to equities and could provide balance in a diversified portfolio.

Bitcoin is likely to out-perform the market

Even if Goldman Sachs' report is off-target, I think Bitcoin is likely to outpace the broader market by a long shot.

I'm not sure I buy some of the more incredible predictions by Bitcoin's evangelists like Cathie Wood, who believes it could top $3.8 million by 2030, but it's not impossible. Bitcoin has earned its place as a legitimate investment asset. As more institutional money pours in, Bitcoin will likely march higher.

I would caution investors nearing retirement, however. Bitcoin is still a relatively volatile asset and is not where you want your money if you need guaranteed income.

For investors with more risk tolerance, however, Bitcoin is a smart choice. Obviously, buying in when Bitcoin is near all-time highs increases your risk, but I don't think it's a reason to hold off. As they say, time in the market beats timing the market.