Bitcoin has surged to $50,000 for the first time in over two years, marking a significant rebound from a string of scandals and bankruptcies that had cast doubts on the sustainability of digital assets.
The pioneering cryptocurrency has tripled in value since the beginning of last year, recovering from a steep 64% decline in 2022. Bitcoin’s last trade at $50,000 was recorded in December 2021, still below its all-time high of nearly $69,000 in November 2021.
The dramatic price swings witnessed since Bitcoin’s inception over a decade ago have long been a magnet for speculators. While initially touted as an alternative to traditional finance, the recent rally has been fueled by optimism stemming from last month’s US approval of exchange-traded funds directly tied to Bitcoin, suggesting growing mainstream acceptance.
“There is a lot of talk about an inflow of money into this asset,” said Matt Maley, chief market strategist at Miller Tabak & Co. “I’d also note that momentum players are getting excited as well.”
The resurgence in crypto prices coincides with broader market sentiment, as investors show a renewed appetite for risk amid expectations of monetary policy easing by the Federal Reserve. Historically, higher interest rates have dampened the appeal of riskier assets such as cryptocurrencies.
“The appetite for risk has spilled over into digital assets as well,” noted Chris Newhouse, a DeFi analyst at Cumberland Labs.
Shares of companies with ties to the crypto sector also saw gains on Monday, with Bitcoin proxy MicroStrategy rising 10%, trading platform Coinbase Global increasing by 4.8%, and miner Marathon Digital jumping 12%.
Bitcoin has now recouped all its losses since the May 2022 collapse of stablecoin TerraUSD, which triggered a cascade of failures culminating in the downfall of Sam Bankman-Fried’s FTX exchange in November 2022.
With Bankman-Fried convicted of fraud and Binance co-founder Changpeng Zhao awaiting sentencing for failure to implement anti-money laundering policies and US sanctions violations, analysts see fewer imminent risks to the industry, driving crypto prices higher.
The introduction of nine US spot Bitcoin exchange-traded funds on Jan. 11, along with the conversion of the more than decade-old Grayscale Bitcoin Trust into an ETF, has promised to broaden the investor base for the token. The new funds have attracted approximately $8 billion in net inflows so far, while the more than $6 billion outflow from the Grayscale fund since its conversion now seems to be tapering off.
“Enthusiast buyers bring in more enthusiast buyers, pushing prices further up,” explained Fadi Aboualfa, head of research at crypto-custodian Copper Technologies Ltd. “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% (as we saw last week).”
Optimism about the upcoming quadrennial Bitcoin halving in April is also permeating across the crypto sphere. Halving reduces the quantity of Bitcoin that miners receive for verifying transactions on the blockchain, historically serving as a price support.
Apart from ETF inflows, sentiment toward Bitcoin is “typically positive” during the Lunar New Year holidays currently underway in Asia, according to Fundstrat Global Advisors.
