Bitcoin hits Australian dollar record ahead of April’s ‘halving’

As it stands, around 900 bitcoins are produced daily, as large miners solve complex puzzles that increase circulation. But the newly issued US ETFs require around 2800 bitcoins per day, according to James Butterfill, head of research at CoinShares.

“Bitcoin has previously been sensitive to interest rates, but this is not a macroeconomic story at all – it’s all about demand,” said John Toto, head of trading at Independent Reserve, a local crypto exchange.

Compounding the soaring demand is an impending supply crunch during an event known as “halving”. In April, the bitcoin blockchain will undergo a software upgrade that will reduce the number of bitcoin produced every day. The fourth “halving” will reduce the per-block output to 3.125 bitcoin.

But volatility in the controversial asset class remains a risk. Throughout Thursday, more than $US700 million worth of crypto positions were liquidated as the price see-sawed wildly.

Once prices begin to fall during a sharp price uptick, the most highly leveraged traders are forced to liquidate, exacerbating a sell-off.

DVOL, a bitcoin volatility futures instrument powered by Deribit, shows that bitcoin’s 30-day implied volatility has jumped sharply and is recording a measure of 68 per cent.

“It’s a dangerous market for leveraged traders,” Ms Wade added. “It can fall just as quickly as its run-up.”

Bitcoin has staged a massive comeback since multi-year lows of around $US20,000 just under a year ago. But the rally hasn’t been entirely smooth. US-listed exchange Coinbase experienced a spate of outages on its retail platform, causing some users to see balances of zero.

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