Bitcoin is experiencing a resurgence, with its value reaching $41,000 on Monday, its highest point in 18 months. This marks a 150% increase in value since the beginning of the year.
The value of bitcoin, which is known for its instability, rose significantly from $5,000 at the beginning of the pandemic to almost $68,000 in November 2021, according to FactSet. This was during a time when there was high demand for technology products. However, prices later dropped due to the Federal Reserve increasing interest rates to control inflation and the downfall of FTX, a major player in the cryptocurrency market.
At the start of 2023, the price of one bitcoin dropped to under $17,000, experiencing a decrease of over 75%. Yet, with the decrease in inflation, investors began to come back in significant numbers. Additionally, the downfall of prominent technology-based banks prompted more investors to shift towards cryptocurrency, pulling out of investments in Silicon Valley startups and other high-risk ventures.
However, the current surge is being driven by the potential approval of spot bitcoin exchange traded funds, a type of investment security that can be traded similarly to stocks.
Experts in the field claim that this alternative method of investing in bitcoin, which involves purchasing it at current market prices rather than through futures contracts, may simplify access to the world of cryptocurrency and reduce some of the known risks associated with investing in digital currencies. In the past, regulators have denied proposals for bitcoin spot ETFs, but recent successes for certain crypto fund managers have increased the likelihood of receiving initial approval, potentially as early as next month.
According to Kaiko research analyst Riyad Carey, there is a great deal of optimism surrounding the potential approval of a spot ETF for bitcoin, which could have a long-term impact. However, Carey also pointed out that regulatory approval does not guarantee sustained growth.
According to experts, the potential authorization of spot bitcoin ETFs could lead to a significant increase in the number of cryptocurrency investors. However, future trading volumes could have varying effects on bitcoin’s worth, as stated by Carey.
During a time of significant turmoil for cryptocurrencies, Bitcoin’s recent surge has also emerged. In the previous month, the U.S. government imposed a $4 billion penalty on Binance, the leading cryptocurrency exchange, and its founder Changpeng Zhao pleaded guilty to a criminal offense.
According to Carey, Binance has persisted in its operations and retention of its market dominance. The recent settlement has also had a positive impact on the market, removing a major concern and potentially contributing to Bitcoin’s recent increase in value.
Despite the recent buzz surrounding bitcoin, specialists continue to assert that cryptocurrency is a risky investment with volatile and unpredictable changes in worth. In a nutshell, individuals can just as easily lose money as they can gain it.
According to former senior market analyst at Oanda, Edward Moya, the collapse of FTX, a major cryptocurrency exchange, had a significant impact on public trust in the crypto industry and caused significant losses for retail investors. Moya also noted that most of the current investments in crypto are coming from institutional sources, such as hedge funds.
According to Carey, the liquidity in cryptocurrency markets has not yet reached its previous levels after the collapse of FTX. This decrease in liquidity can amplify price fluctuations.
“He mentioned that over the last few months, prices have typically been on the rise. However, it’s important for people to remember that they can also suddenly go down.”
As of approximately 1:30 p.m. on Monday in the Eastern time zone, the value of bitcoin was $41,709.
Other cryptocurrencies have experienced increases in their stock prices in recent months, although not at the same rate or level as bitcoin. For instance, Ethereum’s value was $2,223 as of Monday afternoon, showing an 85% growth since the beginning of 2023. On the other hand, Binance Coin and Dash have seen decreases of around 5.25% and 24.37% since the start of the year, with prices of approximately $231 and $32.73 on Monday afternoon.