BOSTON – Bitcoin hovered around US$50,000 after scaling the closely watched level for the first time in more than two years, a remarkable comeback from the cryptocurrency scandals and wipeouts that had cast doubt on the industry’s viability.
The largest digital asset was trading at US$50,100 as at 6.16am on Feb 13 in London (2.16pm in Singapore), having earlier risen as high as US$50,379.
Bitcoin has trebled in value since the start of 2023 after a 64 per cent plunge in 2022. But it remains below the all-time high of almost US$69,000 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 United States approval in January of exchange-traded funds (ETFs) to own Bitcoin directly is leading to greater mainstream acceptance.
“There is a lot of talk about inflow of money into this asset,” said Mr Matt Maley, chief market strategist at Miller Tabak + Co.
“I’d also note that the momentum players are getting excited as well.”
The resurgence in crypto prices comes as investors in the broader financial markets re-embrace risk amid expectations that the US Federal Reserve is moving closer to easing monetary policy.
Higher interest rates tend to dull the allure of riskier assets such as crypto.
“The appetite for risk has trickled over into digital assets as well,” said Mr Chris Newhouse, a DeFi analyst at Cumberland Labs.
Shares of crypto-related companies also gained on Feb 12 with Bitcoin proxy MicroStrategy rising 10 per cent, trading platform Coinbase Global increasing 4.8 per cent and miner Marathon Digital jumping 12 per cent.
Bitcoin has recovered all its losses since the May 2022 implosion of stablecoin TerraUSD, which set in motion the 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 the rout that claimed TerraUSD, 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 Binance co-founder Zhao Changpeng awaiting sentencing for failing to implement anti-money laundering policies and US sanctions violations, crypto prices have moved higher as analysts see fewer looming risks to the industry.
Nine US spot Bitcoin ETFs debuted on Jan 11, while the over-a-decade-old Grayscale Bitcoin Trust converted into an ETF on the same day.
The accessibility of ETFs promises to widen the investor base for the token.
The new funds have attracted a net of about US$8 billion (S$10.8 billion) so far, while the more than US$6 billion outflow from the Grayscale fund since its conversion now appears to be losing steam.
“Enthusiast buyers bring in more enthusiast buyers pushing prices further up,” said Mr Fadi Aboualfa, head of research at crypto custodian Copper Technologies.
“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 per cent (as we saw last week).”
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 as a support for prices based on historical precedent.
Aside from ETF inflows, sentiment towards Bitcoin is “typically positive” during the Chinese New Year holidays, which are currently under way in Asia, Fundstrat Global Advisors wrote in a note. BLOOMBERG
