Rising demand for the world's largest cryptocurrency by market cap, thanks to the surging popularity of spot bitcoin ETFs, is having a profound impact on the market.

"While 900 bitcoins are produced daily, the newly issued US ETFs are demanding 2,800 bitcoins per day," CoinShares's Head of Research James Butterfill told The Block. "This has led to a 28% reduction in exchange holdings since 2020, indicating a market experiencing a significant demand shock.”

On Wednesday, as spot bitcoin ETFs once again broke a daily trading volume record, the price of the cryptocurrency whipsawed around the $60,000 mark. Bitcoin BTC -1.24% has surged approximately 40% in the past month, coinciding with the start of spot bitcoin ETF trading on January 11

With bitcoin briefly hitting $64,000 on some exchanges Wednesday, people are anxious to better understand what is driving the rise in price, according to Butterfill.

"The bitcoin price surge to a high of US$64,000 has sparked curiosity about the factors driving this increase," he said. "Until recently, bitcoin prices were closely aligned with expectations for interest rate cuts, but have since diverged following the introduction of US spot-bitcoin exchange-traded funds. These ETFs have significantly influenced recent price trends."

In total, spot bitcoin ETF hit a new daily record on Wednesday with more than $6 billion trading, according to Bloomberg Intelligence ETF research analyst James Seyffart. The heightened volume was enough to power the products' passed their previous daily volume record set on launch day, Seyffart said.