Bitcoin touches crucial $50,000 level for first time since 2022 plunge
Bitcoin briefly hit the key level of $50,000 for the first time in more than two years in overnight trading, marking a remarkable comeback for the scandal-hit crypto industry.
The largest digital asset was trading at $49,902 as of 9am UAE time on Tuesday, having earlier risen to as high as $50,379. The token has tripled in value since the start of last year following a 64 per cent plunge in 2022. Bitcoin remains about $17,000 below its all-time high of $67,000, achieved in November 2021.
Bitcoin’s wild price fluctuations since its introduction more than a decade ago have long been one of the main attractions to speculators.
It was originally promoted as an alternative to the traditional financial system after the 2008 global financial crisis.
But the latest rally has been driven by optimism that last month’s US approval of spot Bitcoin exchange-traded funds is leading to greater mainstream acceptance.
“There is a lot of talk about inflow of money into this asset,” said Matt Maley, chief market strategist at Miller Tabak. “I’d also note that the momentum players are getting excited as well.”
The resurgence in crypto prices comes as expectations of looser monetary policy burnish the allure of riskier assets.
“The appetite for risk has trickled over into digital assets as well,” said Chris Newhouse, a decentralised finance analyst at Cumberland Labs.
Optimism about the quadrennial Bitcoin halving due in April is also filtering across crypto. Halving cuts the quantity of Bitcoin that miners receive for operating the powerful computers that verify transactions on the blockchain. The event is often viewed as a support for prices based on historical precedent.
Shares of crypto-related companies also gained on Monday, with Bitcoin proxy Micro-Strategy rising 11 per cent, trading platform Coinbase Global increasing 3.8 per cent and miner Marathon Digital Holdings jumping 14.2 per cent.
The positive sentiment spread to Asian stocks related to digital assets, including advances in companies such as Japan’s Monex Group and Woori Technology Investment in South Korea.
Bitcoin has recovered all its losses since the May 2022 implosion of so-called stablecoin TerraUSD, which set in motion a wave of failures that ultimately helped to bring down Sam Bankman-Fried’s FTX exchange in November 2022.
By the time FTX collapsed, the crypto market was already months into the “crypto winter, which also claimed hedge fund Three Arrows Capital and lender Celsius Network.
But the fall of FTX, once one of the top crypto exchanges by trading volume, was even more damaging, with token prices stagnating as liquidity dried up.
Now, with Mr Bankman-Fried convicted of fraud and Binance co-founder Changpeng Zhao awaiting sentencing for US sanctions violations and failing to implement anti-money laundering policies, crypto prices have moved higher as analysts see fewer looming risks to the industry. Nine US spot Bitcoin exchange-traded funds made their debuts on January 11, while Grayscale Bitcoin Trust converted into an ETF on the same day.
The new funds have attracted about $9 billion so far, while a more than $6 billion outflow from the Grayscale fund since its conversion seems to be losing steam.