Understanding the Why Behind Bitcoin’s Latest Surge

Bitcoin recently surged to an all-time high, surpassing its previous peak set more than two years ago. The digital currency exceeded its November 2021 high of nearly $69,000, although it retraced slightly later to hover around $64,000. Currently, Bitcoin boasts a market capitalization of about $1.3 trillion, constituting a significant portion of the overall $2.6 trillion crypto market.

One significant catalyst driving Bitcoin’s ascent since the beginning of the year has been the ETFs’ approval by the U.S. Securities and Exchange Commission (SEC) in January. ETFs are a collection of assets, akin to shares, that track the price movements of Bitcoin.

The licensing of ETFs indicates institutional maturity in the Bitcoin sector, according to Chainalysis director of strategic initiatives, Jeff Billingham. He noted that such infrastructure and confidence were absent in prior crypto bull runs.

In addition, the planned halving event — which would cut the rate at which Bitcoin is circulated in half — has in the past caused price increases because of a decrease in supply.

Despite the recent market enthusiasm, concerns persist regarding the stability of the crypto ecosystem. The collapse of FTX, a major crypto exchange, in 2022, followed by the conviction of its founder, Sam Bankman-Fried, underscores these doubts. Similarly, Changpeng Zhao, the founder of Binance, faces legal troubles in the U.S. due to money-laundering breaches.

SEC chair Gary Gensler maintains a cautious stance toward the crypto market, notwithstanding the approval of Bitcoin spot ETFs, which came after a court ruling forced his hand.

ING’s head international economist, James Knightley, noted that increased U.S. inflation has also sparked interest in Bitcoin as a hedge against rising costs. Investors have been driven to riskier assets such as Bitcoin due to a wider increase in technology equities.

According to Neil Wilson, head analyst at Finalto, the current market momentum is not long-term sustainable. He sees a possible consolidation or correction coming, noting things like investors taking profits and fewer new purchasers.

Meanwhile, regulatory scrutiny of cryptocurrencies is intensifying in the European Union and the United Kingdom. Proposals to subject stablecoins to existing regulations are underway in the U.K. while the EU has enacted the Markets in Crypto-Assets (MiCa) framework, mandating registration for crypto firms.

The recent approval of ETFs provides regulatory validation that bolsters Bitcoin’s resurgence, according to Harry Eddis, global cohead at Linklaters. According to Eddis, increasing regulation, especially in the form of strictly controlled cryptocurrency assets such as ETFs, may entice investors who were previously hesitant to engage in cryptocurrency because they were worried about security and trust. Those growing numbers could boost the price of Bitcoin.

The current upswing in the price of Bitcoin is a welcome development for crypto mining companies such as Bit Mining Ltd. (NYSE: BTCM) as they stand to benefit more from each coin they mine and add into circulation.

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