Sunday, April 21, 2024

Bitcoin climbs above $45,000 for first time since April 2022


  • After 156% gain in 2023, bitcoin starts new year on front foot
  • Optimism around ETF approval gathering momentum
  • Rising bets on rate cuts also boost risk appetite

SINGAPORE, Jan 2 (Reuters) – Bitcoin stormed above $45,000 on Tuesday for the first time since April 2022 as the world’s biggest cryptocurrency started the New Year with a bang buoyed by optimism around possible approval of exchange-traded spot bitcoin funds.

Bitcoin touched a 21-month peak of $45,532, having gained 156% last year in its strongest yearly performance since 2020. It was last up 2.5% at $45,318 but remains far off the record high of $69,000 it touched in November 2021.

Reuters Graphics
Reuters Graphics

Ether , the coin linked to the ethereum blockchain network, was 1.45% higher at $2,386 on Tuesday, having surged 91% in 2023.

Investor focus has squarely been on whether the U.S. securities regulator will soon approve a spot bitcoin ETF, which would throw open the bitcoin market to millions more investors and draw billions in investments.

The U.S. Securities and Exchange Commission has rejected multiple applications to launch spot bitcoin ETFs in recent years, arguing that the cryptocurrency market is vulnerable to manipulation.

In recent months, however, there have been increasing signs that regulators are prepared to sign off on at least some of the 13 proposed spot bitcoin ETFs, with expectations that the decision will likely come in early January.

The reaction to a possible rejection would be clear cut and likely see an immediate tumble, said Chris Weston, head of research at Pepperstone.

“However, should we see the green light the obvious question is whether we get a buy the rumour, sell-on-fact scenario playout or whether it promotes another leg higher,” he added in a note.

1. What is driving Bitcoin’s surge above $45,000?

The recent surge in Bitcoin’s value, reaching over $45,000, can be attributed to several factors. Firstly, the cryptocurrency had an impressive gain of 156% in the previous year, marking its strongest performance since 2020. This significant increase has drawn attention and sparked optimism within the market. The primary driver behind this surge is the widespread anticipation of the approval of exchange-traded spot bitcoin funds (ETFs). Investors are closely watching the U.S. Securities and Exchange Commission’s (SEC) stance on spot bitcoin ETFs, which, if approved, could open up the market to millions of new investors.

Bitcoin touched a 21-month peak, and the focus is now on whether the U.S. securities regulator will approve a spot bitcoin ETF, potentially attracting billions in investments. Despite being 2.5% below its record high of $69,000 in November 2021, the current positive momentum is indicative of a thriving market.

2. What role does the U.S. Securities and Exchange Commission play in Bitcoin’s future?

The U.S. Securities and Exchange Commission (SEC) plays a crucial role in determining Bitcoin’s future trajectory. Multiple applications for spot bitcoin ETFs have been rejected in recent years, with the SEC expressing concerns about the susceptibility of the cryptocurrency market to manipulation. However, recent signals suggest a shift in the regulatory stance, with expectations that some of the 13 proposed spot bitcoin ETFs might gain approval in early January. The decision, whether positive or negative, is expected to have a profound impact on Bitcoin’s immediate future, influencing market sentiment and investor behavior.

3. How might the market react to the approval or rejection of spot bitcoin ETFs?

The market’s response to the potential approval or rejection of spot bitcoin ETFs is a topic of considerable speculation. Chris Weston, Head of Research at Pepperstone, notes that a rejection would likely lead to an immediate downturn. On the other hand, if approved, the question arises whether the market will witness a “buy the rumor, sell-on-fact” scenario or if it will spur another upward trend. The uncertainty surrounding this outcome adds an extra layer of complexity to the current dynamics of the cryptocurrency market.

4. What impact do rising bets on central banks cutting interest rates have on cryptocurrencies?

The positive momentum in the cryptocurrency market is not solely tied to ETF speculations. Rising bets on major central banks cutting interest rates in the coming year have also contributed to the boost in cryptocurrencies. This positive sentiment has helped the market recover from the gloom that followed the collapse of FTX and other crypto-businesses in 2022. The belief in a more accommodative monetary policy, both in the United States and globally, positions cryptocurrencies, including Bitcoin, for notable growth in the upcoming year.

5. How has Ether, linked to the Ethereum blockchain, performed amidst Bitcoin’s surge?

While much attention is on Bitcoin, it’s essential to consider the performance of other cryptocurrencies. Ether, the coin linked to the Ethereum blockchain network, has experienced a 1.45% increase, reaching $2,386 on Tuesday. Its notable surge of 91% in 2023 showcases a positive trend in the broader cryptocurrency market. Understanding the performance of alternative cryptocurrencies provides a comprehensive view of the overall health and dynamics of the digital asset space.

6. What factors are expected to drive notable growth in the crypto market this year?

Jupiter Zheng, Partner of Liquid Funds at HashKey Capital, predicts significant growth in the crypto market for the current year. Key influencing factors include the influx of investment funds from spot ETFs, the Bitcoin halving, and a more accommodative monetary policy. The convergence of these factors creates a favorable environment for the crypto market to expand. Investors are keenly watching how these elements will interact and shape the market in the coming months.

7. How have previous rejections of spot bitcoin ETFs influenced market dynamics?

The history of rejections of spot bitcoin ETFs by the SEC has left a lasting impact on market dynamics. The cryptocurrency market’s vulnerability to manipulation, as cited by the SEC, has led to a cautious approach from regulators. Understanding the historical context of these rejections provides valuable insights into the current shift in sentiment and the growing possibility of approval. Investors and market analysts are closely examining these past rejections to gauge potential outcomes and market reactions in the present scenario.

8. Can Bitcoin’s recent performance be sustained throughout the year?

Bitcoin’s recent performance, reaching a 21-month peak and surpassing $45,000, raises the question of sustainability. While the cryptocurrency has demonstrated remarkable growth, uncertainties remain regarding its ability to maintain this momentum. Factors such as regulatory decisions, global economic conditions, and market sentiment will play pivotal roles in determining the sustainability of Bitcoin’s upward trajectory.

9. What role does the collapse of FTX and other crypto-businesses in 2022 play in the current market scenario?

The collapse of FTX and other crypto-businesses in 2022 cast a shadow over the cryptocurrency market. Understanding the aftermath of these failures and their implications for investor confidence is crucial in evaluating the current market scenario. The recovery from this dark period showcases resilience within the crypto market and highlights the factors contributing to its resurgence.

10. How might Bitcoin’s performance in 2023 influence its future growth?

Bitcoin’s impressive performance in 2023, with a gain of 156%, sets the stage for potential future growth. The cryptocurrency’s ability to weather challenges, including regulatory uncertainties and market volatility, positions it as a resilient asset. Investors are closely monitoring the lessons learned from the past year and assessing how they might shape Bitcoin’s trajectory in the years to come.

Reuters Graphics
Reuters Graphics

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