Bitcoin Has Surpassed $41,000 For The First Time Since April 2022. What’s Behind The Price Surge?

NEW YORK – Bitcoin is experiencing a renaissance. On Monday, the world’s largest cryptocurrency surpassed $41,000 for the first time in over a year and a half, marking a 150% increase this year.

According to FactSet, volatile bitcoin soared from just over $5,000 at the start of the epidemic to roughly $68,000 in November 2021, a period highlighted by a rise in demand for technology products. Prices dropped back to earth after an aggressive sequence of Federal Reserve rate hikes aimed at curbing inflation, followed by the collapse of FTX, one of the largest crypto businesses.

When 2023 began, a single bitcoin was worth less than $17,000, losing more than 75% of its value. However, once inflation began to fall, investors returned in huge numbers. Furthermore, the failure of large tech-focused banks prompted additional investors to resort to cryptocurrency as they exited holdings in Silicon Valley start-ups and other hazardous bets.

However, anticipation for the legalization of spot bitcoin exchange-traded funds – a pooled investment product that can be bought and sold like stocks — is propelling this recent rally.

Bitcoin Has Surpassed $41,000 For The First Time Since April 2022. What’s Behind The Price Surge?

According to industry supporters, this new manner of investing in bitcoin at spot prices rather than futures pricing could make it easy for anyone to enter the crypto verse while minimizing some of the well-documented hazards of cryptocurrency investing. Previously, regulators rejected bitcoin spot ETF applications, but recent victories for some crypto fund managers have increased the likelihood of a first approval as soon as next month.

“The longer-term catalyst (for bitcoin) is a lot of optimism related to the potential approval of a spot ETF,” said Riyad Carey, a Kaiko research analyst, on Monday. However, he pointed out that a regulatory green light does not guarantee sustained gains.

Bitcoin Has Surpassed $41,000 For The First Time Since April 2022. What’s Behind The Price Surge?

While analysts anticipate that the probable introduction of spot bitcoin ETFs will generate a much wider pool of crypto investors, Carey added that future volumes might go either way. This might either increase or decrease the value of Bitcoin.

Bitcoin’s recent rise comes at an extremely disruptive time for cryptocurrencies. Last month, the United States authorities fined Binance, the world’s largest crypto exchange, $4 billion after its founder, Changpeng Zhao, pleaded guilty to a felony charge.

However, according to Carey, Binance continues to operate and maintain its market share. In some respects, the company’s settlement “propelled the market forward more by removing one of the… more ominous overhangs that was a sort of big question mark,” he added, pointing to bitcoin’s advances two weeks after the announcement.

Despite Bitcoin’s recent euphoria, experts warn that it is a dangerous trade with highly unpredictable price movements. Investors might lose money as fast as they make it.

The bankruptcy of crypto exchange behemoth FTX last year also “left a big scar” on the public’s confidence in the crypto business and crushed ordinary investors, according to the report. According to Edward Moya, a former senior market analyst at Oanda, institutional money, such as hedge funds, drives most of the current crypto investment.

Bitcoin Has Surpassed $41,000 For The First Time Since April 2022. What’s Behind The Price Surge?

Carey also stated that liquidity in cryptocurrency markets has yet to restore to pre-FTX levels, and that lesser liquidity can exacerbate price volatility.

“In the past few months, that has normally been the price moving up — but people should always be aware it can go in the reverse and quickly,” he said.

The price was $41,709 as of 1:30 p.m. Eastern time Monday.

Other crypto players’ equities have risen in recent months at different rates or to the same heights as Bitcoin. For example, Ethereum was trading at $2,223 on Monday afternoon, up 85% from the beginning of 2023. Meanwhile, Binance Coin and Dash are down about 5.25% and 24.37% for the year, with Monday afternoon values of around $231 and $32, respectively.

SOURCE – (AP)