Bitcoin spiked above US$50,000 yesterday for the first time in more than two years as investors grow optimistic that US approval of broader trading in the unit will ramp up demand.
The cryptocurrency has enjoyed a strong run in recent months, fueled by expectations US lawmakers would allow the creation of exchange-traded funds (ETFs) that track the price and let the public invest in crypto without directly purchasing it.
After initially dropping in reaction to last month’s green light by Washington, bitcoin has rallied about 25 percent since Jan. 22.
Photo: EPA-EFE
That advance saw it hit as much as US$50,328, according to Bloomberg data, its highest level since late 2021.
And observers were optimistic about the outlook.
“Enthusiast buyers bring in more enthusiast buyers pushing prices further up,” Copper Technologies Ltd research head Fadi Aboualfa said. “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).”
By 3:30am GMT yesterday, bitcoin had dropped slightly, to US$49,950.
The currency remains well below its record value of almost US$69,000 in 2020, but the rally marks a recovery following a series of high-profile scandals and collapses that rocked the crypto industry.
FTX Trading Ltd, the world’s second-biggest crypto exchange, dramatically went under last year, and its boss Sam Bankman-Fried faces up to 110 years in prison for what prosecutors described as “one of the biggest financial frauds in American history.”
In November, Changpeng “CZ” Zhao (趙長鵬) stepped down as CEO of Binance Holdings Ltd (幣安) — the world’s biggest crypto exchange — after he and the company pleaded guilty to sweeping money laundering violations.
Bitcoin has also been boosted by hopes that the US Federal Reserve will start to cut interest rates this year as inflation eases.
The asset’s value has been driven by the supply crunch expected next year because of an event called “halving.”
Bitcoin is created — or “mined” — as a reward when powerful computers solve complex problems, but the amount of bitcoin is limited and every four years, the reward is halved.
The next “halving” is due in May.
“It’s a really interesting move. The expectation of rate cuts certainly helps, but it doesn’t explain what’s really set fire to bitcoin over the past four, five sessions,” IG Markets Ltd analyst Tony Sycamore said. “In that respect, I think it’s more a focus on the halving ... and some ETFs inflows.”
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