Bitcoin soared above $45,000 on Tuesday, making its highest level since April 2022. The surge is attributed to a combination of factors, including optimism surrounding the approval of exchange-traded spot bitcoin funds (ETFs) and rising expectations of interest rate cuts by major central banks.
Bitcoin reached a 21-month peak of $45,532, showcasing a 156% gain in the previous year, its most robust yearly performance since 2020.
Despite this rally, Bitcoin still trails its all-time high of $69,000 recorded in November 2021. The surge has also positively influenced other cryptocurrencies, with Ether, linked to the Ethereum blockchain, experiencing a 91% surge in 2023 and reaching $2,386 on Tuesday.
Investor attention has been focused on the approval of a spot bitcoin ETF by the U.S. Securities and Exchange Commission (SEC).
The approval of such an ETF is expected to open up the bitcoin market to a investor base and attract investments.
While the SEC has rejected multiple applications for spot bitcoin ETFs in recent years, there is growing anticipation that some of the 13 proposed ETFs might receive approval, with expectations for a decision in early January.
Several asset managers, including BlackRock Asset Management, VanEck, Valkyrie Investments, Bitwise Investment Advisers, Invesco, Fidelity, WisdomTree Investments, and a joint venture between Ark Investments and 21Shares, are vying for the position of launching the first approved BTC ETFs.
The Fidelity Wise Origin Bitcoin Fund, with fees of only 0.39%, is to be one of the least expensive options. The approval of Bitcoin ETFs is seen as a game-changer for the cryptocurrency industry.
These ETFs differ from previous ones tied to futures contracts, as they directly involve the trading of physical bitcoin.
Experts argue that SEC approval and ETF launches could legitimize the industry further, making it more accessible to institutional and retail investors alike.
As Bitcoin continues to break new ground, market analysts are closely monitoring reactions. Chris Weston, Head of Research at Pepperstone, the clear-cut nature of the market’s response to a possible rejection, foreseeing a decline.
However, if approved, questions about whether it will lead to a buy the rumor, sell-on-fact scenario or propel another upward movement in prices.
The positive sentiment in the cryptocurrency market is also fueled by expectations of interest rate cuts by major central banks.
The possibility of rate cuts in 2024 has been viewed as a boon for cryptocurrencies, helping them overcome the lingering gloom from the collapse of FTX and other crypto-business failures in 2022.
Jupiter Zheng, Partner of Liquid Funds at HashKey Capital, anticipates growth in the crypto market in 2024.
He identifies key influencing factors such as increased investment from spot ETFs, Bitcoin halving, and a more monetary policy both in the United States and globally.
The regulatory for cryptocurrencies has increased scrutiny, with various regulatory bodies evaluating the risks and benefits of these digital assets.
The positive momentum in the cryptocurrency market, fueled by expectations of major central banks cutting interest rates, has helped dispel the gloom that lingered over crypto markets following the failures of FTX and other crypto businesses in 2022.
Jupiter Zheng predicts growth in the crypto market in 2024. Factors influencing this growth include increased investment from spot ETFs, the upcoming Bitcoin halving, and a more monetary policy globally.
Analysts such as Markus Thielen, founder of digital asset research firm 10x Research, show historical patterns indicating that bitcoin tends to perform well during U.S. election years, with Bitcoin halving cycles in 2012, 2016, and 2020.