The price of Bitcoin has doubled since the start of the year in signs of a resurgence of investor confidence in the cryptocurrency after its value tumbled last year.
Bitcoin rose more than 3% today to touch the $34,500 mark. It is up 29% in the past month and up 104% since January, though it remains well down on the $64,400 peak it hit in November 2021. Ethereum has also seen a bounce-back, with its price up 13% in the past month and 49% since the start of the year.
A combination of economic and regulatory factors are thought to be behind the lift in investor confidence.
Simon Peters, analyst at trading and investment platform eToro, said: “The key driver for this positive price move is the rumoured news around a spot ETF approval last Monday. Although this proved to be 'fake news' it was perhaps a preview or a taster of what is to come should a US based spot bitcoin ETF be approved.”
A Bitcoin ETF, or exchange-traded fund, is considered a major boost to the cryptocurrency as it will allow investors who might otherwise be put off from trading speculative digital assets to invest in them via a public stock exchange, expanding Bitcoin’s user base and deepening its liquidity in the process.
A number of applications for Bitcoin ETFs, including by investment giant Blackrock, are still awaiting approval. The US securities regulator, had previously rejected similar ETF applications on investor protection grounds. But earlier this week it signalled it would not be appealing a court case which found it was wrong to reject ETF application from crypto company Grayscale.
The end of a long run of central bank interest rate rises also appears to be helping push up Bitcoin prices.
James Harte, market analyst at Tickmill Group, said: “BTC bulls have also been helped by last week’s comments from Fed chairman Powell. Powell signalled that with yields rising sharply, the Fed might not need to use any further tightening.
“While rates are expected to stay at elevated levels for longer, the dialling back of near-term Fed rate hike expectations is having a strong supporting effect for BTC.
The surge in crypto prices comes as the UK is racing ahead to become the dominant crypto hub in Europe, new research shows.
Crypto transaction volumes surged to more than $200 billion in the year to July 2023, according to a report by market insights business Chainalysis, representing more than the volumes of Germany and France combined.
Jordan Wain, UK Policy Lead at Chainalysis, said: “The UK has a legacy of financial services talent that may enable more rapid adoption of crypto as an asset class and market more broadly when it comes to decentralised finance.”
However, the implementation of new crypto promotion rules by the UK’s financial watchdog has caused difficulty for some crypto firms, with some crypto exchanges such as Binance opting to restrict services for UK users while they make changes.
“It is unclear what impact this will have on crypto adoption, but it could certainly play a role going forward as the fewer venues that allow users to become involved inevitably leads to lower numbers will be able to adopt,” Wain said.
