Bitcoin jumped to $50,000 for the first time in more than two years, staging a remarkable comeback from a series of crypto industry scandals and bankruptcies that raised questions about the viability of digital assets.
The original cryptocurrency has tripled in value since the start of last year, climbing back from a 64% plunge in 2022. Bitcoin last traded at $50,000 in December 2021. The price is still below the all-time high of nearly $69,000 reached in November 2021 ..
The wild price fluctuations seen since Bitcoin’s introduction more than a decade ago have long been one of the main attractions for speculators. While originally promoted as an alternative to the traditional financial system, the latest rally has been driven by optimism that last month’s US approval of exchange-traded funds to own Bitcoin will lead directly to greater mainstream acceptance.
“There’s a lot of talk about the influx of money into this asset class,” said Matt Maley, chief market strategist at Miller Tabak & Co. “I would also notice that the current players are getting excited as well.”
The resurgence in crypto prices comes as investors in the broader financial markets re-embrace risk amid expectations that the Federal Reserve is moving closer to easing monetary policy. Higher interest rates tend to dull the appeal or riskier assets like crypto.
“The appetite for risk has flowed into digital assets as well,” said Chris Newhouse, a DeFi analyst at Cumberland Labs.
Shares of crypto-related companies also gained on Monday with Bitcoin proxy MicroStrategy rising 10%, trading platform Coinbase Global rising 4.8% and miner Marathon Digital jumping 12%.
Bitcoin has recovered all of its losses since the May 2022 implosion of stablecoin TerraUSD, which set off the wave of failures that ultimately helped bring down Sam Bankman-Fried’s FTX exchange in November 2022.
When FTX fell, the crypto market was already months into the failure that claimed TerraUSD, hedge fund Three Arrows Capital and lender Celsius Network. But the fall of FTX, once one of the top crypto exchanges in terms of trading volume, was even more damaging, with token prices stagnating as liquidity dried up.
Now with Bankman-Fried convicted of fraud, and Binance co-founder Changpeng Zhao awaiting trial for failing to implement anti-money laundering policies and US sanctions violations, crypto prices have moved higher as analysts see less looming risks for the industry.
Nine US points of Bitcoin exchange-traded funds debuted on January 11, while the more than decade-old Grayscale Bitcoin Trust converted to an ETF the same day. The accessibility of ETFs promises to broaden the investment base for the token. The new funds have attracted a net of around $8 billion so far, while the more than $6 billion outflow from the Grayscale fund since its conversion now appears to be losing steam.
“Enthusiastic buyers bring more enthusiastic buyers pushing prices higher,” said Fadi Aboualfa, head of research at crypto watchdog Copper Technologies Ltd. “The cryptocurrency has momentum after several green weeks and has a big chance to go higher. when markets see weekly moves of more than 10% (as we saw last week).”
Optimism about April’s four-year Bitcoin halving is also filtering across crypto. A halving cuts the amount of Bitcoin that miners receive for running the powerful computers that verify transactions on the blockchain. The event is often seen as support for prices based on historical precedent.
In addition to ETF inflows, sentiment toward Bitcoin is “typically positive” during the Lunar New Year holidays, which are currently underway in Asia, Fundstrat Global Advisors wrote in a note.
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This story was published by a wire agency feed without modifications to the text.
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Published: 13 Feb 2024, 07:11 IST