Michelle ThompsonBitcoin is experiencing a renaissance. The biggest cryptocurrency in the world reached a peak of around $35,000 this week, more than doubling its price from the beginning of 2023 and its highest position in almost 18 months.
According to FactSet, the price of a cryptocurrency soared from slightly over $5,000 at the beginning of the epidemic to around $68,000 in November 2021, during a period of explosive expansion in the technology industry. After the Federal Reserve aggressively raised interest rates in an effort to combat inflation, prices collapsed. FTX, one of the largest cryptocurrency companies, was the catalyst for this decline.
After losing more than 75% of its value, a single bitcoin could be purchased for less than $17,000 by the start of 2023. However, as inflation started to slow this year, investors started to come back in force. Furthermore, when well-known banks with a concentration on technology failed, additional investors fled their investments in riskier ventures like Silicon Valley start-ups and instead turned to cryptocurrencies.
The likelihood of growing a sizable investment base is now receiving another boost for bitcoin. Proponents of the industry claim that a new method of investing in bitcoin at spot prices rather than futures may make it simpler for anyone to enter the cryptoverse and reduce some of the well-known risks connected to cryptocurrency trading.
The likelihood of bitcoin exchange-traded funds, a pooled investment instrument that can be purchased and sold like stocks, ever happening is gaining traction.
Although federal regulators haven’t given their approval yet, certain cryptocurrency fund managers who applied for bitcoin spot ETFs have had some recent victories, increasing their chances of becoming approved—possibly in the upcoming months.
For example, Grayscale filed a lawsuit against the Securities and Exchange Commission last year after the agency denied its application due to concerns over investor safeguards and other matters, and the court recently ordered the agency to reevaluate the ETF for Grayscale’s bitcoin fund. The ruling was not appealed by the SEC.
The Depository Trust and Clearing Corporation, which clears market trades, listed BlackRock’s iShares Bitcoin Trust, drawing attention online on Monday, according to Edward Moya, a senior market analyst at Oanda. According to him, that might have played a role in the Bitcoin increase this week.
On Tuesday, IShares Bitcoin Trust looked to be momentarily offline, but by Wednesday, it was back up. A DTCC representative informed The Associated Press that this list includes both current and prospective ETF securities. iShares was introduced in August, according to the representative.
According to Moya and others, social media noise and false information can have a significant impact on cryptocurrency trading. According to Kaiko Research, there was a small increase in the price of bitcoin last week, for instance, following an incorrect article by cryptocurrency news site Cointelegraph regarding the SEC’s approval of iShares’ spot bitcoin ETF on X, the former Twitter platform. That article was quickly removed.
However, Kaiko research analyst Riyad Carey points out that the recent spike in bitcoin is not limited to specific happenings or participants, attributing it to “more of a broad market rally” surrounding spot bitcoin ETF chances.
Cryptocurrency is still a dangerous wager, despite the recent euphoria surrounding bitcoin. It is referred to as “the most volatile asset class” by experts such as Moya, citing very unanticipated variations in value. To put it briefly, investors may experience a rapid loss of capital.
Retail investors’ faith in the cryptocurrency market was severely damaged by the collapse of the largest cryptocurrency exchange, FTX, according to Moya, who also pointed out that institutional capital, such as hedge funds, is currently responsible for the majority of cryptocurrency investment.
He noted, “We’re still seeing interest is coming back into the space, but it’s not the same as it was before,” and he was keeping an eye on the development of upcoming regulations.
And a great deal is unknown. The likelihood of spot ETF approval has increased the price of bitcoin and the stocks of major companies in the industry, such as Coinbase and MicroStrategy, although it’s unclear how long this trend will last. Regulatory approval does not guarantee future profits.
Will there be ongoing interest in the event of approval? Will the trade volumes for this ETF be visible to us? If it falls short, bitcoin will face difficulties, according to Moya. “I may be more bullish in the near term until we receive concrete confirmation.”
Wednesday at 12:30 p.m. ET, the price of bitcoin was $34,789.
