Bitcoin is back—and more valuable than ever. 

On March 5, the cryptocurrency bitcoin crossed $68,900, the highest price in its 15-year history. The news comes less than two years after a vicious industry-wide crypto meltdown that vaporized billions of dollars and culminated in the criminal convictions of industry titans Sam Bankman-Fried and Changpeng Zhao. After the fall of Bankman-Fried’s FTX in November 2022, bitcoin dropped below $17,000.

Most analysts aren’t surprised by this rebound: bitcoin has long risen and fallen in volatile cycles. But they are split about what its price surge means for the future. Crypto enthusiasts contend that bitcoin’s upswing is a sign of its newfound maturity and power. Skeptics argue that scant fundamentals underpin bitcoin’s recent rise, and that its success is merely a byproduct of a larger global story. Immediately after its record high, bitcoin dropped back down to $61,000 on Tuesday afternoon. 

Here are some of the key factors going into bitcoin’s record moment. 

Bitcoin moves like other risky assets

Bitcoin was designed as an alternative to the traditional finance system, in which people might be able to send money around the world without extractive intermediaries. But over the past few years, bitcoin has largely derived its value in accordance with larger macroeconomic trends. Specifically, bitcoin has moved like a speculative asset: a high-risk class of investments that draw interest for their potential to greatly increase, as opposed to their underlying utility. When interest rates shrank during the pandemic, allowing people to borrow and invest money more easily, bitcoin boomed. When interest rates climbed at the fastest pace in four decades following Russia’s invasion of Ukraine and central banks’ efforts to fight inflation, bitcoin shrank once again. 

In early 2024, interest rates remain high. But the Federal Reserve suggested in December that it would stop raising rates and implement cuts this year. Since then, inflation has slowly decreased, and the American economy has performed better than expected: U.S. employers added 353,000 jobs in January, with wages also increasing. These factors make it more likely that investors will be willing to spend money on risky assets. “All of these things create an environment in which more speculative assets with a less certain future can start to perform well again,” Craig Erlam, a senior market analyst at OANDA, says.  

Bitcoin has notched key regulatory victories

Bitcoin’s rise has been further propelled by judicial victories against one of crypto’s foremost enemies: The U.S. Securities and Exchange Commission. The governmental agency has long been skeptical of crypto, and has brought many cases against crypto companies it alleged were acting illegally. But a judge sided with one of those companies, Ripple, last July. A month later, a federal appeals court in Washington ruled that the SEC was wrong to block the efforts of a crypto company trying to create a bitcoin ETF or exchange-traded fund: an investment vehicle that allows mainstream institutional investors to bet on bitcoin’s price on popular trading platforms like the Nasdaq, without having to actually buy bitcoin itself. 

After that ruling, the SEC had little choice but to reverse course. In January, nine bitcoin ETFs entered the market, resulting in more than $4 billion in trading on their very first day of availability. 

“We had this notion that the government was more or less going to destroy the industry: To push it underneath the surface,” says Haseeb Qureshi, a managing partner at the crypto venture capital firm Dragonfly. “And it didn’t work.” 

Not only did the bitcoin ETFs give crypto enthusiasts a moral victory, but they also brought financial heavyweights into the fold. The ETF from BlackRock, the world’s largest asset manager, has performed especially well, conferring prestige upon a volatile asset. Qureshi says that the current crypto explosion has been driven mostly by traditional institutions like BlackRock, whereas the previous bull run in 2021 was led by small-scale everyday investors. This difference helps explain why it may seem like general mainstream interest in bitcoin is lower than it was three years ago. 

“Signs of a full, retail-driven bull market—like meme coins pumping and Coinbase rising on the App Store—are just starting to penetrate the picture of how crypto is getting traded,” Qureshi says. 

But the trend of major institutions leading the price surge has crypto skeptics worried. “The involvement of traditional and trusted financial firms like BlackRock and Fidelity not only provide false comfort, but also a level of assumed legitimacy,” says Dennis Kelleher, a co-founder of the financial reform advocacy group Better Markets. “Financial firms have engaged in a massive marketing campaign that’s just getting off the ground, and opened up a gigantic new pool of Main Street investors.” 

But bitcoin still isn’t being used as a currency 

Bitcoin’s price, no matter how robust, does not actually mean that bitcoin has become more useful for everyday transactions, or more widely adopted for payments since its 2022 crash. 

In late 2023, the crypto analytics firm Chainalysis found that grassroots crypto adoption around the world was down significantly from its 2021 highs. DeFi, or decentralized finance, is still mostly used by high-risk speculators as opposed to more mundane, everyday financial services. And El Salvador, which became the first country to make bitcoin legal tender in 2021, has struggled with adoption: a study found that some 88% of Salvadorans did not use it in 2023, and the IMF recommended that the country remove bitcoin’s status as legal tender. 

Read More: El Salvador Is Betting on Bitcoin to Rebrand the Country — and Strengthen the President’s Grip

“In terms of actual real-life use cases, I don’t feel like anything has changed since its peak,” Erlam says. “It’s all belief in what the product can become as opposed to what it offers now.” 

Qureshi argues that this type of thinking is beside the point. “The idea that bitcoin is a global payment system has more or less disappeared,” he says. “All the people who are holding the ETF are voting with their money that this thing is like gold: that the right way to think about it is to buy it and hold it.” 

Erlam and Qureshi also disagree on the impact that the rise of AI may have on bitcoin. Erlam contends that AI will absorb much of bitcoin’s oxygen. “AI stocks can now move from $20 to $50 to $100 in a short period of time—and those speculative instruments have both real life use cases and potentially massive returns,” he says. “If we start seeing more and more use cases emerge in AI, it will be an interesting test for bitcoin.” 

Qureshi disagrees. “It’s like saying, ‘If this car is fast and that car is fast, then the first car isn’t fast anymore,’” he says. “That’s not how financial markets work.” 

Analysts believe this record is just the start of another cycle 

Both Qureshi, who is part of the crypto industry, and Dennis Kelleher, a vehement skeptic, believe that bitcoin will only continue to increase in value over the next year. Bitcoin has yet to hit the “halving,” a mechanism built into Bitcoin that aims to make the currency more scarce and thus more valuable. Bitcoin halvings happen roughly every four years, with the next one set for April. Each of the previous three halvings were followed by large jumps in bitcoin’s price, leading people to believe that the same will happen again. 

Because bitcoin is a speculative asset, positive sentiment around it has the tendency to multiply.  If people believe that the halving will increase bitcoin’s price, then they may buy more of it, which can actually lead to a price surge: self-reinforcing dynamics in which belief manifests into reality. 

“We’re in the early innings here, given how much money is still on the sidelines from both retail and institutions,” Qureshi says. 

But it is exactly the self-reinforcing dynamic, and the lessening of regulations, that has Kelleher worried. Every time crypto has risen, it has fallen back down. Kelleher points out that during the last crypto crash, there was almost no contagion with the rest of the financial system, because regulators had kept the crypto industry at an arm’s length.  “What we’re going to be seeing over the next months and years is increasing interconnections with the core of the financial system,” he says. “So the question is, how broad will the connections be? And will the crypto crash bring down the financial system, just like derivatives brought down the financial system in 2008?”