Once more, bitcoin is gaining popularity. For the first time in more than a year and a half, the largest cryptocurrency in the world surged above $41,000 on Monday, marking a 150% increase so far this year.
According to FactSet, volatile bitcoin shot up from just over $5,000 at the beginning of the epidemic to roughly $68,000 in November 2021, a time when demand for technology products was at an all-time high. Following an aggressive round of rate hikes by the Federal Reserve intended to contain inflation, prices returned to earth, followed by the bankruptcy of FTX, one of the largest cryptocurrency companies.
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, once inflation started to decline, investors started to come back in force. Furthermore, when well-known banks with a concentration on technology failed, additional investors fled their investments in high-risk ventures like Silicon Valley start-ups and instead turned to cryptocurrencies.
However, the likelihood that spot bitcoin exchange-traded funds, a pooled financial instrument that can be purchased and sold like stocks, will be approved is what is driving this most recent increase.
Proponents of the industry claim that this new approach of investing in bitcoin at spot prices rather than futures may make it simpler for anybody to enter the cryptoverse and reduce some of the well-known hazards connected to cryptocurrency investing. Applications for bitcoin spot ETFs have been denied by regulators in the past, but recent victories for certain cryptocurrency fund managers have increased the likelihood of a first approval—possibly as soon as next month.
According to Kaiko research analyst Riyad Carey, “a lot of optimism related to the potential approval of a spot ETF is the longer-term catalyst (for bitcoin)” on Monday. However, he pointed out that regulatory approval does not guarantee future profits.
Future volumes could go either way, according to Carey, even though analysts anticipate that the approval of spot bitcoin ETFs will greatly increase the pool of cryptocurrency investors. That might make Bitcoin more valuable or less valuable.
The current surge in Bitcoin also comes at a very turbulent time for cryptocurrencies. Just last month, when its founder Changpeng Zhao entered a guilty plea to a criminal charge, the U.S. government fined Binance, the biggest cryptocurrency exchange in the world, $4 billion.
However, Carey pointed out that Binance is still in business and has a market share. Noting Bitcoin’s advances in the two weeks since the settlement was revealed, he said that in some respects, the company’s resolution “propelled the market forward more by removing one of the more ominous overhangs that was a sort of big question mark.”
Experts continue to warn that cryptocurrency is a dangerous trade with radically unpredictable value fluctuations, despite the recent euphoria surrounding Bitcoin. To put it briefly, investors may experience a rapid loss of capital.
The public’s trust in the cryptocurrency business was severely damaged, and retail investors lost everything as a result of the collapse of the massive cryptocurrency exchange FTX last year. Former Oanda senior market analyst Edward Moya said that institutional capital, such as hedge funds, is driving much of the current cryptocurrency investment.
Carey went on to say that less liquidity can make price swings worse and that the liquidity in cryptocurrency markets has not yet recovered to what it was before FTX’s crash.
“Prices have typically increased over the last few months, but people should always be aware that things can change drastically and quickly,” he stated.
The price of bitcoin was $41,709 as of Monday at 1:30 p.m. Eastern time.
The stocks of some other major players in the cryptocurrency space have increased in recent months as well, though not as quickly or as high as Bitcoin. For instance, Ethereum was trading at $2,223 on Monday afternoon, up 85% from the year’s beginning. Meanwhile, with Monday afternoon values of about $231 and $32, respectively, Binance Coin and Dash are down roughly 5.25% and 24.37% for the year.
