Bitcoin Surges to $50,000 for the First Time Since 2021 on ETF Demand

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(Bloomberg) — Bit­coin hov­ered around $50,000 after scal­ing the close­ly watched lev­el for the first time in over two years, a remark­able come­back from the cryp­to scan­dals and wipe­outs that had cast doubt on the industry’s viability.

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The largest dig­i­tal asset was trad­ing at $49,960 as of 10:52 a.m. Tues­day in Sin­ga­pore hav­ing ear­li­er risen as high as $50,379. The token has tripled in val­ue since the start of last year fol­low­ing a 64% plunge in 2022. Bit­coin remains rough­ly $19,000 below the all-time high achieved in Novem­ber 2021.

The wild price fluc­tu­a­tions seen since the intro­duc­tion of Bit­coin more than a decade ago have long been one of the main attrac­tions to spec­u­la­tors. While orig­i­nal­ly pro­mot­ed as an alter­na­tive to the tra­di­tion­al finan­cial sys­tem, the lat­est ral­ly has been dri­ven by opti­mism that last month’s US approval of spot Bit­coin exchange-trad­ed funds is lead­ing to greater main­stream acceptance.

Read more: What Are These New Bit­coin ETFs and How Do They Work?

“There is a lot of talk about inflow of mon­ey into this asset,” said Matt Maley, chief mar­ket strate­gist at Miller Tabak & Co. “I’d also note that the momen­tum play­ers are get­ting excit­ed as well.”

Risk Appetite

The resur­gence in cryp­to prices comes as expec­ta­tions of loos­er mon­e­tary pol­i­cy bur­nish the allure of riski­er assets. “The appetite for risk has trick­led over into dig­i­tal assets as well,” said Chris New­house, a DeFi ana­lyst at Cum­ber­land Labs.

Shares of cryp­to-relat­ed com­pa­nies also gained Mon­day with Bit­coin proxy MicroS­trat­e­gy Inc. ris­ing 11%, trad­ing plat­form Coin­base Glob­al Inc. increas­ing 3.8% and min­er Marathon Dig­i­tal Hold­ings Inc. jump­ing 14.2%.

The pos­i­tive sen­ti­ment spread to Asian stocks relat­ed to dig­i­tal assets, includ­ing advances in com­pa­nies such as Japan’s Mon­ex Group and Woori Tech­nol­o­gy Invest­ment Co. in South Korea.

Bit­coin has recov­ered all its loss­es since the May 2022 implo­sion of sta­ble­coin Ter­raUSD, which set in motion a wave of fail­ures that ulti­mate­ly helped bring down Sam Bankman-Fried’s FTX exchange in Novem­ber 2022.

By the time FTX went down, the cryp­to mar­ket was already months into a rout that also claimed hedge fund Three Arrows Cap­i­tal and lender Cel­sius Net­work. But the fall of FTX, once one of the top cryp­to exchanges by trad­ing vol­ume, was even more dam­ag­ing, with token prices stag­nat­ing as liq­uid­i­ty dried up.

Now with Bankman-Fried con­vict­ed of fraud, and the Binance exchange’s co-founder Chang­peng Zhao await­ing sen­tenc­ing for US sanc­tions vio­la­tions and fail­ing to imple­ment anti-mon­ey laun­der­ing poli­cies, cryp­to prices have moved high­er as ana­lysts see few­er loom­ing risks to the industry.

ETF Inflows

Nine US spot Bit­coin exchange-trad­ed funds debuted on Jan. 11, while the more than decade-old Grayscale Bit­coin Trust con­vert­ed into an ETF the same day. The acces­si­bil­i­ty of ETFs promis­es to widen the investor base for the token. The new funds have attract­ed about $9 bil­lion so far, while a more than $6 bil­lion out­flow from the Grayscale fund since its con­ver­sion seems to be los­ing steam.

“We are a lit­tle ways away from there being broad­er accep­tance,” Susan Thomp­son, head of SPDR Amer­i­c­as Dis­tri­b­u­tion at State Street Glob­al Advi­sors, said on Bloomberg Tele­vi­sion. “Most advis­ers we talk with are tak­ing a wait-and-see approach.”

Finan­cial advis­ers need to exam­ine an asset’s cor­re­la­tions over time to assess poten­tial diver­si­fi­ca­tion ben­e­fits, where­as Bitcoin’s impact is hard to pre­dict as the token is rel­a­tive­ly short-lived, Thomp­son said.

Opti­mism about the qua­dren­ni­al Bit­coin halv­ing due in April is also fil­ter­ing across cryp­to. Halv­ing cuts the quan­ti­ty of Bit­coin that min­ers receive for oper­at­ing the pow­er­ful com­put­ers that ver­i­fy trans­ac­tions on the blockchain. The event is often viewed a sup­port for prices based on his­tor­i­cal precedent.

Aside from ETF inflows, sen­ti­ment toward Bit­coin is “typ­i­cal­ly pos­i­tive” dur­ing the Lunar New Year hol­i­days that are cur­rent­ly under­way in Asia, Fund­strat Glob­al Advi­sors wrote in a note.

–With assis­tance from Isabelle Lee, Sunil Jag­tiani and Suvashree Ghosh.

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