Bitcoin surges past $45,000 on its way to a 2-year peak as 2024 kicks off

Bitcoin picture from pexel.com

On Jan 2, the world's largest cryptocurrency, bitcoin, surged past $45,000 on Tuesday for the first time since April 2022. The price hit a 21-month high of $45,922, having gained 156% in the previous year, its strongest annual performance since 2020. It was last up 3.1% at $45,509, but it is still well below the record high of $69,000 it hit in November 2021.

Tuesday saw ether, the second-most popular cryptocurrency, rise 1.2% to $2,386.50 after surging 91% in 2023. Crypto stocks, which track changes in bitcoin prices, also saw a surge, with Riot Platforms (RIOT.O), Marathon Digital (MARA.O), and CleanSpark (CLSK.O) all gaining between 7% and 10% following steep declines in the final trading day of 2023. MicroStrategy, a software company and bitcoin investor, added 13.4%, while ProShares Bitcoin Strategy ETF (BITO.P), which tracks bitcoin futures, added 7.8%.

The U.S. Securities and Exchange Commission has rejected multiple applications to launch spot bitcoin ETFs in recent years, arguing that the cryptocurrency market is vulnerable to manipulation. However, in recent months, there have been increasing signs that regulators are prepared to sign off on at least some of the 13 proposed spot bitcoin ETFs. Investor focus has been squarely on whether the U.S. securities regulator will soon approve a spot bitcoin ETF, which would throw open the market to millions more investors and draw billions in investments.

A spot bitcoin ETF approval would "open the door to cohorts of investors that are out of this market at the moment and will definitely improve the liquidity of the market," according to Matteo Greco, analyst at digital asset firm Fineqia International (FNQ.CD). "We expect a positive approval, and I will not be surprised if, after the approval, we see a retracement of lower price levels before we go up again," Greco said.

As more people place bets that major central banks will lower interest rates this year, the outlook for cryptocurrencies has also improved, helping to dispel the gloom that had descended on them after FTX collapsed and other crypto-business failures in 2022. According to Markus Thielen, founder of digital asset research firm 10x Research, bitcoin tends to perform well during U.S. election years, coinciding with cycles of halving in 2012, 2016, and 2020.