A surge is sweeping through! BlackRock sets a record with a single-day investment of $520 million, marking the roaring return of Bitcoin leverage.

Zhitong App learned that Bitcoin surged by 13% to $63,968 on Wednesday, marking the largest intraday gain since March last year, followed by a more than halved increase. This is the fifth consecutive day of Bitcoin's rise, pushing the cryptocurrency price to its highest level in two years, approaching the historical peak of nearly $69,000.

So far this year, Bitcoin has surged by over 45%, making it the best-performing asset among various categories even after last year's skyrocketing performance.

Of note, among the super data lists driving the latest boom cycle of cryptocurrencies, there is another astonishing data point: a record $520 million flowed into the BlackRock Bitcoin ETF in a single day.

On Tuesday, the iShares Bitcoin Trust (IBIT) set a record for the largest single-day inflow, among a batch of new U.S. exchange-traded funds (ETFs) directly investing in the world's largest cryptocurrency. Bloomberg data shows that this is also the second-largest single-day inflow among all asset categories of ETFs in the United States.

This trading frenzy continued until Wednesday. With Bitcoin soaring past $60,000 and heading towards a new record, a large amount of cash flowing into BlackRock funds helps explain the significant rally in digital assets this year. As predicted by supporters of Bitcoin ETFs, the approval of Bitcoin spot ETFs last month opened new channels for wealth management companies, hedge funds, and ordinary investors to invest in the entire asset class.

Furthermore, the recent surge in Bitcoin has fueled a broad rebound in digital assets, with trading activity going wild, leading to a series of malfunctions at the cryptocurrency exchange Coinbase Global (COIN.US).

Approval of Spot ETF Fuels the Rally

Many analysts believe that the gradual rise in Bitcoin prices for the fifth consecutive day is partly due to the optimistic outlook on the inflow of funds into approved exchange-traded funds last month.

Stephane Ouellette, CEO of FRNT Financial, a platform focused on digital assets, said, "This rally seems to be mainly influenced by Bitcoin ETFs. It is estimated that less than 20% of investment advisors have obtained approval from the company to invest their clients in this product. This process may take up to a year."

Strategists at JPMorgan, including Kenneth Worthington, wrote that Bitcoin's surge to a two-year high will "further stimulate ETF sales, becoming a milestone threshold."

In sync with Bitcoin's recent rally, the $6.5 billion IBIT has seen inflows for 32 consecutive days. Following closely is the Fidelity Bitcoin Fund (FBTC), which has attracted daily inflows since its launch and has garnered a net inflow of $4.48 billion since its inception. The influx of funds highlights the growing demand for Bitcoin spot ETFs. This trend also underscores the convenience of trading assets through ETFs that track assets, as well as the reasons investors have long been driving Bitcoin funds.

Data calculated by Eric Balchunas from Bloomberg Intelligence shows that as of midday Wednesday, the daily trading volume of 9 Bitcoin ETFs, excluding the Grayscale Bitcoin Trust Fund (GBTC), far exceeded $2.6 billion, with IBIT setting a new record with a daily trading volume of $1.5 billion. Jim Bianco from Bianco Research stated that given IBIT's dominant position in the industry, it is not surprising that IBIT has the highest trading volume.

He said over the phone that the flow of funds is "definitely" driven by retail traders, and "funds have helped boost prices."

Bitcoin Leverage Resurges to Fuel the Trend

In addition, after years of stagnation, the leverage of cryptocurrencies is roaring back, fueling a new bull market and a new wave of concerns for Bitcoin.

Chris Newhouse, a DeFi analyst at Cumberland Labs, said, "Earlier, with increasing demand and ETF fund inflows, the market may have been dominated by spot trading, but now it has transitioned to a comprehensive frenzy of rise expressed through perpetual futures."

Leverage is re-entering almost every corner of the market, including NFTs, mining, decentralized financial applications, and derivatives trading on mainstream exchanges. According to CCData, since October, the total outstanding Bitcoin derivatives (with leverage up to 100 times) on centralized exchanges have increased by nearly 90%, reaching the highest level since the collapse of the last cryptocurrency bull market in early 2022. According to CCData, the outstanding contracts of cryptocurrency exchanges Binance, OKX, and Bybit have risen to levels unseen since the peak of the 2021 bull market.

Parker Merritt, a senior solutions engineer at CoinMetrics, said, "So far this year, outstanding contracts have increased by 29%, and in dollar terms, the only time a higher level was reached was in November 2021 when Bitcoin hit a historical high of $69,000. In other words, investors are leveraging up in preparation for setting new historical highs."

Furthermore, the short squeeze in the derivatives market may have been one of the driving forces behind Bitcoin's rebound on Wednesday.

Vetle Lunde, a senior analyst at K33 Research, said, "The strong flow of ETFs leading to price increases forces shorts to cover, driving prices higher, creating a solid momentum cycle." The surge in Bitcoin prices is attributed to the increase in new long positions in Bitcoin futures, especially leveraged long positions, and the rising demand for Bitcoin ETFs.

Data from Deribit shows that the options market indicates traders are betting on Bitcoin reaching $65,000, with the highest open interest concentrated in bullish options expiring on March 29.

Jaime Baeza, founder of the cryptocurrency hedge fund AnBInvestments, commented, "The current trend is very sharp with high leverage, and both derivatives fundamentals and financing rates suggest this. Therefore, I wouldn't be surprised by a 20% or larger pullback."

Investors may have already experienced this taste on Wednesday evening when the price of Bitcoin briefly dropped by about 8% before rebounding.