NEW YORK (NEWSnet/AP) — Bitcoin is having a moment. On Monday, the world’s largest cryptocurrency soared past $41,000 for the first time in move than 18 months, and marking a 150% rise so far in 2023.
Bitcoin rocketed from just over $5,000 at the start of the pandemic to nearly $68,000 in November 2021, according to FactSet. Prices fell back to earth during an aggressive series of Federal Reserve rate hikes aimed at taming inflation and then the collapse of FTX, one of the largest companies in crypto.
When 2023 began, a single bitcoin was available for $17,000 after losing more than 75% of its value. Investors, however, began returning in large numbers as inflation started to drop. The collapse of tech-focused banks led more investors to turn to crypto as they bailed out of positions in Silicon Valley start-ups and other risky bets.
Fueling the latest rally are prospects for the possible approval of spot bitcoin exchange traded funds, a pooled investment security that may be bought and sold like stocks.
Industry advocates say this new way of investing in bitcoin at spot prices, instead of futures, could make it simpler for anyone to enter the cryptoverse with less risk.
Regulators previously rejected bitcoin spot ETF applications, but recent wins for some crypto fund managers have improved odds for a first approval, perhaps as soon as January 2024.
“The longer-term catalyst (for bitcoin) is a lot of optimism related to the potential approval of a spot ETF,” Kaiko research analyst Riyad Carey said Monday. He noted, however, that a regulatory green light doesn’t promise continued gains.
While analysts expect the potential approval of spot bitcoin ETFs to create a much larger pool of crypto investors, future volumes could go either way, Carey added. That could either boost or undermine bitcoin’s value.
Bitcoin’s current rally also arrives during a disruptive period for cryptocurrency. In November, the U.S. government slapped Binance with a $4 million fine as its founder, Changpeng Zhao, pleaded guilty to a felony charge.
Despite the recent excitement around bitcoin, experts still maintain that crypto is a risky bet with wildly unpredictable fluctuations in value. In short, investors can lose money as quickly as they make it.
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