In a recent development, Bitcoin has skyrocketed beyond $41,000, marking its highest point since April 2022. According to a report by the Associated Press, this surge represents a staggering 150 per cent increase in value for the world’s largest cryptocurrency in just the first half of the year.
According to FactSet, Bitcoin’s journey has been volatile, initially leaping from $5,000 during the pandemic to nearly $68,000 in November 2021, followed by a significant dip due to Federal Reserve rate hikes and the collapse of crypto giant FTX.
2023: A year of recovery
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As 2023 began, Bitcoin experienced a setback, with a single unit trading for less than $17,000 after losing more than 75 per cent of its value. However, investor confidence returned as inflation cooled, and the collapse of tech-focused banks led many to explore crypto investments amid an environment of market uncertainty.
Spot ETFs: The driving force
The current rally in Bitcoin prices is attributed to the growing optimism surrounding the potential approval of spot Bitcoin exchange-traded funds (ETFs). This new investment avenue, allowing investors to buy and sell Bitcoin at spot prices rather than futures, is seen as a game-changer.
Analysts suggest that this could democratise crypto investments, making it more accessible to a broader audience while mitigating some of the inherent risks associated with cryptocurrency investments. Recent successes by crypto fund managers have improved the odds of regulatory approval, potentially occurring as early as next month.
Mixed predictions for the future
The Associated Press cited Kaiko research analyst Riyad Carey, who emphasised that while the approval of spot Bitcoin ETFs could attract a larger pool of investors, the impact on future volumes remains uncertain. This development could either significantly boost or potentially undermine Bitcoin’s value, adding an element of unpredictability to the current market dynamics.
Binance’s setback and continued operation
Amidst Bitcoin’s rally, the cryptocurrency market faced disruptions, notably with the U.S. government imposing a $4 billion fine on Binance, the world’s largest crypto exchange. Founder Changpeng Zhao pleaded guilty to a felony charge, yet Binance continues to operate, maintaining its market share. Analysts argue that the settlement, while a setback, removed a significant overhang, contributing to Bitcoin’s gains in the weeks following the announcement.
Caution amidst excitement
Despite the recent enthusiasm surrounding Bitcoin, experts caution that cryptocurrencies remain a risky venture with unpredictable fluctuations. The collapse of FTX in the previous year left a lasting impact on public confidence, particularly among retail investors.
Edward Moya, a former senior market analyst at Oanda, highlighted that institutional money, such as hedge funds, currently dominates the crypto investing landscape. Additionally, Carey pointed out that liquidity in cryptocurrency markets is yet to fully recover from the FTX collapse, potentially amplifying price fluctuations.
Market snapshot
As of 1:30 p.m. Eastern time on Monday, Bitcoin was valued at $41,709. While Bitcoin steals the spotlight, other cryptocurrencies have seen varied performances. Ethereum stood at $2,223, reflecting an 85 per cent increase since the beginning of 2023. In contrast, Binance Coin and Dash experienced declines of 5.25 per cent and 24.37 per cent, with Monday afternoon prices at around $231 and $32, respectively.
(With inputs from the Associated Press)
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