Bitcoin has achieved a significant milestone today, as reported by Bloomberg, by surpassing $50,000 for the first time in over two years. This marks a notable recovery for the cryptocurrency industry, which has faced setbacks including scandals and bankruptcies that cast doubts on the sustainability of digital assets.
Bitcoin’s value has tripled 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.
Factors Driving the Rally: The recent rally in Bitcoin’s price is attributed to optimism following the regulatory approval of exchange-traded funds (ETFs) for direct Bitcoin ownership in the United States. Analysts believe this approval is contributing to increased mainstream acceptance.
Matt Maley, Chief Market Strategist at Miller Tabak & Co., noted, “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.”
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. Crypto-related companies such as MicroStrategy, Coinbase Global, and Marathon Digital have experienced gains.
Bitcoin has fully recovered from losses incurred since the implosion of stablecoin TerraUSD in May 2022, which triggered a series of failures leading to the downfall of the FTX exchange in November 2022. Recent legal developments, such as convictions for fraud and legal issues faced by industry figures, have also reduced perceived risks, contributing to the upward movement in prices.
Impact of ETFs and Positive Sentiment: 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.
Fadi Aboualfa, Head of Research at crypto-custodian Copper Technologies, highlighted the role of enthusiast buyers, stating, “Enthusiast buyers bring in more enthusiast buyers pushing prices further up.”
The positive sentiment is also influenced by optimism surrounding the quadrennial Bitcoin halving scheduled for April. Amid the current Lunar New Year holidays in Asia, sentiment towards Bitcoin is described as typically positive. The cryptocurrency’s momentum, fueled by consecutive positive weeks, remains a key factor driving its upward trajectory.
Expert Take: Shivam Thakral, CEO of BuyUcoin, India’s second-longest-running digital asset exchange, commented on the market situation, noting, “The total crypto market capitalization has risen to $1.87 trillion with Bitcoin crossing $50,000 for the first time in two years.” He emphasized the potential impact of the upcoming Bitcoin halving and macro factors such as anticipated rate cuts by the US Federal Reserve and the growing popularity of Bitcoin ETFs on the market in the mid to long term. Thakral expects Bitcoin to retest its all-time high of $69,000 post-halving.
