In a dramatic turn of events, Bitcoin has once again taken center stage as it surged past the $41,000 price mark on Monday, reaching levels unseen in over a year and a half. This marks a staggering 150% rise in the cryptocurrency’s value so far this year.
The digital asset, known for its volatility, experienced a rollercoaster ride from just over $5,000 at the onset of the pandemic to nearly $68,000 in November 2021, fueled by a surge in demand for technology products.
However, a series of events, including aggressive Federal Reserve rate hikes to combat inflation and the collapse of FTX, a major player in the crypto space, brought Bitcoin’s price back down to earth. As the calendar flipped to 2023, a single bitcoin could be acquired for less than $17,000, having lost over 75% of its value.
Investors, undeterred by the previous setbacks, began reentering the market as inflation started to cool, turning to Bitcoin as a hedge against traditional assets. The collapse of prominent tech-focused banks also pushed more investors towards cryptocurrencies as they exited positions in Silicon Valley start-ups and other risky ventures.
One notable shift in the investment landscape is the growing interest in spot prices over futures, offering a new approach to investing in Bitcoin. Advocates argue that this method could make entering the crypto space more accessible while mitigating some of the well-documented risks associated with cryptocurrency investments.
Recent wins for crypto fund managers have improved the odds for the approval of a bitcoin spot ETF, potentially paving the way for a new wave of investors.
Kaiko research analyst Riyad Carey highlighted the potential approval of a spot ETF as a longer-term catalyst for Bitcoin. However, he cautioned that regulatory approval does not guarantee sustained gains, emphasizing the unpredictable nature of the cryptocurrency market.
The recent rally in Bitcoin’s price is also tied to the prospects of spot Bitcoin exchange-traded funds (ETFs). If approved, these investment securities could attract a much larger pool of crypto investors, impacting future volumes and potentially influencing Bitcoin’s value.
In the midst of this surge, the cryptocurrency landscape faces disruption, exemplified by the U.S. government’s imposition of a $4 billion fine on Binance, the world’s largest crypto exchange. Binance’s founder, Changpeng Zhao, pleaded guilty to a felony charge, but the exchange continues to operate, maintaining its market share.
Analysts suggest that the settlement, in a way, removed an ominous overhang from the market, contributing to Bitcoin’s gains in the weeks following the announcement.
Despite the excitement surrounding Bitcoin’s resurgence, experts remain cautious, emphasizing the inherent risks and unpredictable fluctuations in the cryptocurrency market. The collapse of FTX last year left a significant impact on public confidence, with institutional money, particularly from hedge funds, now dominating the crypto investing landscape.
Edward Moya, a former senior market analyst at Oanda, warned of the lingering scars from FTX’s collapse, noting that liquidity in cryptocurrency markets has yet to fully recover. Lower liquidity can exacerbate price fluctuations, making it crucial for investors to stay vigilant, considering the potential for rapid reversals in the market.
On a Wednesday evening, Bitcoin cost $41,520 due to volatility in the cryptocurrency world. Though Bitcoin is the most famous one, there are some other cryptocurrencies like Ethereum that have significantly risen, although not as fast as Bitcoin. For example, on Monday afternoon, Ethereum hit $2,223, which represented a rise of 85% for the year ended in January last year.
Meanwhile, Binance Coin and Dash saw fluctuations, with prices around $231 and $32, respectively, and year-to-date changes of -5.25% and -24.37%.