WASHINGTON: Bitcoin hit the US$50,000 level for the first time in more than two years as the world’s largest cryptocurrency was buoyed by expectations of interest rate cuts later this year and last month’s regulatory nod for US exchange-traded funds (ETFs) designed to track its price.
The cryptocurrency has risen 16.3% so far this year, on Monday, touching its highest since Dec 27, 2021.
“US$50,000 is a significant milestone for bitcoin after the launch of spot ETFs last month not only failed to elicit a move above this key psychological level but led to a 20% sell-off,” said Antoni Trenchev, co-founder of crypto lending platform Nexo.
Crypto stocks also enjoyed a boost on Monday, with crypto exchange Coinbase up 4.9% and crypto miners Riot Platforms and Marathon Digital up 10.8% and 11.9%, respectively.
Shares of software firm MicroStrategy – a notable buyer of bitcoin – were up 10.2%.
The price of ether, the second-largest cryptocurrency, was up 4.12% at US$2,607.57.
Global stock indexes also edged higher on Monday, as traders looked for cues on when the US Federal Reserve (Fed) might begin cutting interest rates.
Analysts and financial market expectations both point to May as a potential start for rate cuts this year.
The primary driver behind bitcoin’s recent price appreciation “can be attributed to the increased inflow into BTC spot ETFs,” said Matteo Greco, a research analyst at fintech investment firm Fineqia International, in a research note.
The US securities regulator on Jan 10 approved the first US spot bitcoin ETFs, a watershed for the world’s largest cryptocurrency and the broader crypto industry, which had been trying to bring such a product to market for more than a decade.
Greco in particular noted that outflows from Grayscale Investment’s Grayscale Bitcoin Trust (GBTC) – which received approval from the US Securities and Exchange Commission (SEC) in January to convert to an ETF – have begun to slow.
“While GBTC recorded a cumulative outflow of US$415mil last week, representing a significant reduction from previous weeks, BTC Spot ETFs saw a total net inflow of about US$1.2bil during the same period, marking the highest weekly inflow since their launch,” he said.
Analysts at Bernstein have estimated that flows into the new ETFs will build up gradually to cross US$10bil in 2024, while Standard Chartered analysts have said the products could draw US$50bil to US$100bil this year alone.
Other analysts have said inflows could be US$55bil over five years.
The market is also eyeing seven pending applications in front of the US SEC for ETFs tied to the spot price of ether. The SEC is due to deliver a final decision on several of those proposals by May. — Reuters
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