Hannah Lang and Elizabeth Howcroft
WASHINGTON/LONDON (Reuters) – Bitcoin hit $50,000 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 regulatory approval last month for U.S. exchange-traded funds designed to track it price.
The cryptocurrency is up 16.3% this year and on Monday hit its highest level since Dec. 27, 2021. At 12:56 pm EST (1756 GMT), Bitcoin was up 4.96% on the day at $49,899, having hovered around $50,000. level.
“$50,000 is a major milestone for Bitcoin, as the launch of spot ETFs last month not only failed to generate a move above this key psychological level, but also led to a 20% sell-off,” said Antoni Trenchev, co-founder of the crypto lending platform. Nexo.
Crypto stocks also saw gains on Monday, with crypto exchange Coinbase (NASDAQ:) up 4.9% and crypto miners Riot Platforms (NASDAQ:) and Marathon Digital (NASDAQ:) up 10.8% and 11.9%. respectively. Shares of software company MicroStrategy, a prominent buyer of bitcoin, rose 10.2%.
The price of Ether, the second-largest cryptocurrency, rose 4.12% to $2,607.57.
Global stocks also rose on Monday as traders looked for signals about when the US Federal Reserve might start cutting interest rates. Analysts and financial market expectations point to May as the potential start of rate cuts this year.
ETF ABUNDANCE
The main driver behind the recent rise in bitcoin prices “can be attributed to increased inflows into spot BTC ETFs,” Matteo Greco, an analyst at fintech investment firm Fineqia International, said in a research note.
US securities regulators on January 10 approved the first US spot Bitcoin ETFs, marking a watershed moment for the world’s largest cryptocurrency and the entire crypto industry, which has been trying to bring such a product to market for more than a decade.
Greco noted in particular that outflows from Grayscale Investment’s Grayscale Trust, which received SEC approval in January to convert to an ETF, have begun to slow.
“While GBTC recorded cumulative outflows of $415 million last week, representing a significant decline from previous weeks, total net inflows of BTC spot ETFs over the same period were approximately $1.2 billion, the most high weekly inflows since their launch,” he said. .
Analysts at Bernstein estimate that flows into new ETFs will gradually increase to top $10 billion in 2024, while analysts at Standard Chartered (OTC:) say the products could attract $50 billion to $100 billion this year alone. Other analysts say inflows could reach $55 billion over five years.
The market is also considering seven applications pending before the US Securities and Exchange Commission (SEC) for ETFs linked to the spot price of ether. The Securities and Exchange Commission (SEC) is expected to make a final decision on several of these proposals by May.
Investors are also looking forward to the next Bitcoin halving, expected in April, analysts said. The process is intended to slow down the release of Bitcoin, which has a limited supply of 21 million tokens, of which 19 million have already been created. Bitcoin has risen through three previous halvings, the most recent of which occurred in 2020.
“With (the) fourth Bitcoin halving, the Fed’s first interest rate cut, and the potential approval of a spot ETF, this all has big implications for the smallest, youngest and most retail-dominated asset class,” said Ben Laidler, strategist at global markets at eToro.