Bitcoin today achieved a significant milestone by reaching $50,000 for the first time in over two years, Bloomberg reported. The world's largest cryptocurrency last traded at $50,000 in December 2021.
This marks a notable recovery from the setbacks faced by the crypto industry, including scandals and bankruptcies, which cast doubts on the sustainability of digital assets.
Bitcoin has tripled in value since the beginning of last year, rebounding from a 64 percent decline in 2022. Despite this surge, the current price remains below the all-time high of nearly $69,000 recorded in November 2021.
Bitcoin's price fluctuations have historically attracted speculators, and the recent rally is attributed to optimism following the United States' regulatory approval of exchange-traded funds (ETFs) for direct Bitcoin ownership, as per the report. Analysts believe this approval is contributing to increased mainstream acceptance, it said.
"There is a lot of talk about the inflow of money into this asset. I'd also note that the momentum players are getting excited as well," Matt Maley, Chief Market Strategist at Miller Tabak & Co. told Bloomberg.
Investors in broader financial markets are embracing risk, anticipating a shift in the US Federal Reserve's monetary policy. This change in sentiment has spilled over into digital assets, as per the report. Crypto-related companies, including MicroStrategy, Coinbase Global, and Marathon Digital, experienced 10 percent, 4.8 percent, and 12 percent of gains on February 12, it added.
Bitcoin has now fully recovered from losses incurred since the implosion of stablecoin TerraUSD in May 2022, which triggered a series of failures leading to the November 2022 downfall of the FTX exchange, founded by Sam Bankman-Fried. Further, recent legal developments, such as Bankman-Fried's conviction for fraud, and the legal issues faced by Binance co-founder Changpeng Zhao, have also reduced perceived risks in the crypto industry, contributing to the upward movement in prices.
The debut of nine US spot Bitcoin ETFs on January 11, along with the conversion of the Grayscale Bitcoin Trust into an ETF, has widened the investor base for Bitcoin. The new funds have attracted approximately $8 billion, while the outflow from the Grayscale fund since its conversion is slowing.
Fadi Aboualfa, Head of Research at crypto-custodian Copper Technologies, emphasised the role of enthusiast buyers, telling Bloomberg, "Enthusiast buyers bring in more enthusiast buyers pushing prices further up. The cryptocurrency has momentum on the back of several green weeks and has a large chance of going up further when markets see weekly movements upwards of 10 percent (as we saw last week)."
The positive sentiment is also influenced by optimism surrounding the quadrennial Bitcoin halving scheduled for April. And amid the current Lunar New Year holidays in Asia, sentiment towards Bitcoin is described as "typically positive," according to Fundstrat Global Advisors. The cryptocurrency's momentum, fueled by consecutive positive weeks, remains a key factor driving its upward trajectory.
“The total crypto market capitalisation has risen to $1.87 trillion with Bitcoin crossing $50,000 for the first time in two years. As expected, Bitcoin soared to $50,000 after holding and breaking above the $49,000 support. On the other hand, Ethereum is trying to break the $2,700 resistance which might be successful when Bitcoin dominance decreases from the current 52 percent,” Shivam Thakral, CEO of BuyUcoin, India’s second-longest-running digital asset exchange told Mint.
“There are approximately 60 days until the Bitcoin halving in April 2024 which could potentially push the cryptocurrency market to new highs,” he added.
“The macro factors such as the anticipated rate cut by the US Fed and the growing popularity of Bitcoin ETFs will drive the market in the mid to long term. We can expect Bitcoin to retest its all-time high of $69,000 post-halving,” Thakral said.
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