Bitcoin has surged to around $50,000, marking its first time surpassing this milestone in over two years. This achievement represents a notable turnaround for the cryptocurrency, which faced skepticism and setbacks that raised doubts about its future. As of 6:16 a.m. Tuesday in London, Bitcoin was trading at $50,100, reaching as high as $50,379 earlier. Since the beginning of last year, the value of Bitcoin has tripled, rebounding from a 64% drop in 2022, though it remains significantly below its all-time high set in November 2021.
Major points:
The erratic price swings witnessed since Bitcoin’s inception over a decade ago have long fascinated speculators, initially touted as an alternative to traditional finance. The recent surge, however, is driven by optimism stemming from the United States’ approval of spot Bitcoin exchange-traded funds (ETFs) last month, indicating growing mainstream acceptance.
Financce chart >>>Current position of Bitcoin
Risk Tolerance
The appeal of risky assets is being enhanced by forecasts of a looser monetary policy, which is why cryptocurrency prices are rising. Digital assets have also become more risk-tolerant, according to Chris Newhouse, a DeFi analyst at Cumberland Labs.
On Monday, shares of businesses involved in cryptocurrencies increased as well. MicroStrategy Inc., a Bitcoin proxy, surged 11%, Coinbase Global Inc., a trading platform, up 3.8%, and Marathon Digital Holdings Inc., a miner, increased 14.2%.
The good feeling extended to Asian equities pertaining to digital assets, encompassing developments in businesses like South Korea’s Woori Technology Investment Co. and Japan’s Monex Group
Recovering Losses
Bitcoin has regained all the ground lost since the collapse of stablecoin TerraUSD in May 2022, which triggered a series of failures culminating in the downfall of Sam Bankman-Fried’s FTX exchange in November 2022. The demise of FTX, once a top crypto exchange by trading volume, exacerbated the market downturn, leading to stagnant token prices as liquidity evaporated.
With Bankman-Fried convicted of fraud and Binance co-founder Changpeng Zhao facing sentencing for US sanctions violations and failure to implement anti-money laundering measures, analysts perceive fewer imminent risks to the crypto industry, resulting in upward price movements.
ETF Investments
The introduction of nine US spot Bitcoin exchange-traded funds on January 11, alongside the conversion of the over decade-old Grayscale Bitcoin Trust into an ETF on the same day, has expanded the investor base for Bitcoin. These new funds have attracted over $9 billion so far, while the more than $6 billion outflow from the Grayscale fund post-conversion seems to be tapering off.
Financial advisors remain cautious, with many adopting a wait-and-see approach due to the uncertainty surrounding Bitcoin’s impact on diversification benefits, given its relatively short existence and unpredictable nature.
Implications and Expectations
In addition to ETF inflows, optimism surrounding the upcoming quadrennial Bitcoin halving in April is influencing market sentiment. The halving event reduces the amount of Bitcoin awarded to miners for verifying transactions on the blockchain, historically acting as a price support mechanism.
Apart from ETF inflows, sentiment towards Bitcoin tends to be positive during the Lunar New Year holidays currently underway in Asia, as indicated by data from Fundstrat Global Advisors. On Monday, Coinglass data revealed approximately $135 million worth of crypto trading positions betting on lower prices were liquidated, marking the highest tally since January 10, the day US spot ETFs received regulatory approval.
In the wake of Bitcoin’s resurgence, the cryptocurrency market is witnessing renewed enthusiasm and confidence. With Bitcoin surpassing the $50,000 mark after a tumultuous period, investors are reassessing their risk appetite and flocking to digital assets. The recent approval of spot Bitcoin exchange-traded funds (ETFs) in the United States has further fueled this optimism, promising to broaden the investor base and increase mainstream acceptance of Bitcoin.
