Despite recent controversies in the cryptocurrency industry, bitcoin has experienced a resurgence in value. On Monday, its value skyrocketed to nearly $42,000, reaching a level not seen in 18 months, according to data from the CoinDesk Indices. This comes after a series of challenges for the sector, including the highly publicized legal issues faced by prominent platforms such as FTX and Binance.
Despite these setbacks, the price of bitcoin has surged by 150% this year, although it is still lower than its peak of approximately $69,000 in late 2021.
What is bitcoin again?
Bitcoin, introduced in 2009, was the first cryptocurrency. It is a digital token that utilizes peer-to-peer technology for instantaneous transactions without the involvement of a third party, such as a bank or payment processor, as stated by bitcoin’s pseudonymous creator, Satoshi Nakamoto.
In contrast to traditional currency, cryptocurrencies can be used for online purchases and investments, although they are known for their price volatility and investment risks, according to the investment firm Charles Schwab.
With over 11,000 cryptocurrencies in existence, bitcoin holds the highest value in dollar terms and has the largest market capitalization among digital assets, according to data from the crypto price tracker CoinGecko.
Why is bitcoin surging now?
Several factors are contributing to bitcoin’s recent surge. Most notably, there are indications that major investment firms are poised to receive regulatory approval to offer spot bitcoin exchange-traded funds (ETFs) – a type of investment security that can be traded like stocks. Federal regulators are expected to approve several bitcoin ETFs as early as January, which could potentially make crypto investments more accessible to investors, as noted by Yiannis Giokas, a senior product director at Moody’s, speaking to CBS MoneyWatch.
“As more and more managers venture into the bitcoin spot ETF space, more retail and institutional investors, even the more conservative ones, will feel a higher degree of comfort investing in this space,” he said.
Bitcoin prices are also benefitting from growing speculation on Wall Street that the Federal Reserve has concluded its benchmark interest rate hikes now that inflation is receding, and that the central bank may even begin easing monetary policy by mid-2024 to support the economy.
Lower interest rates typically lead investors to allocate more funds to riskier assets such as cryptocurrencies. Greg Magadini, director of derivatives at crypto data firm Amberdata, told CBS MoneyWatch, “Lower rates are bullish for bitcoin.”
Giokas anticipates that 2024 could be a significant year for bitcoin, acting as a barometer for the overall performance of the crypto market.
He stated, “Bitcoin hit $40,000 for the first time in 2021, and every time it was followed by a bull run, so it’s a logical expectation from the markets that another run is on its way,” he said.
— The Associated Press contributed reporting.
