Bitcoin hits US$50,000 milestone, crypto market on a digital rollercoaster

Bitcoin, the largest digital asset, oscillated around the landmark value of US$50,000, a level it hadn’t touched in over two years. This marks a remarkable resurgence following the various cryptocurrency scandals and industry wipeouts that had previously cast a shadow of uncertainty over the sector’s future.

Yesterday, in the United States, Bitcoin’s value soared to an impressive US$50,328, and it was traded at US$49,980 by Tuesday 7.40am in Singapore. The digital currency has witnessed a threefold increase in value since 2021 started, following a significant slump of 64% in 2022. However, Bitcoin has yet to reach its all-time high of just under US$69,000, which it achieved in November 2021.

The extreme price variations that Bitcoin has experienced since its inception over a decade ago have consistently drawn speculators. Although it was initially marketed as an alternative to traditional finance, the recent surge in value is attributed to the optimism fueled by the approval of spot Bitcoin exchange-traded funds in the US last month. This approval is seen as a step towards more widespread acceptance, said Matt Maley, the chief market strategist at Miller Tabak & Co.

“There is a lot of talk about the inflow of money into this asset. I’d also note that the momentum players are getting excited as well.”

Additionally, crypto prices have seen a revival due to the anticipation of more relaxed monetary policies enhancing the appeal of riskier assets, said Chris Newhouse, a DeFi analyst at Cumberland Labs.

“The appetite for risk has trickled over into digital assets as well.”

Shares of crypto-related businesses also experienced an upswing on Monday. Bitcoin proxy MicroStrategy Inc. saw an 11% rise, trading platform Coinbase Global Inc. rose by 3.8%, and miner Marathon Digital Holdings Inc. experienced a significant 14.2% jump. This positive sentiment is expected to influence Asian stocks related to digital assets, reported Bangkok Post.

Past setbacks

Bitcoin managed to regain all its losses since the May 2022 implosion of the stablecoin TerraUSD. This event triggered a series of failures, culminating in the collapse of Sam Bankman-Fried’s FTX exchange in November 2022.

The downfall of FTX, once a leading crypto exchange in terms of trading volume, had a significant impact, with token prices stagnating as liquidity evaporated. However, with Bankman-Fried now convicted of fraud, and co-founder of Binance exchange, Changpeng Zhao, awaiting sentencing for US sanctions violations and failure to implement anti-money laundering policies, crypto prices have been on an upward trajectory as industry experts anticipate fewer impending risks.

As of January 11, nine US spot Bitcoin exchange-traded funds made their debut, while the decade-old Grayscale Bitcoin Trust converted into an ETF on the same day. The availability of ETFs is expected to expand the investor base for the token. The new funds have attracted approximately US$9 billion, while the exodus from the Grayscale fund, amounting to over US$6 billion since its conversion, seems to be decelerating, said Fadi Aboualfa, head of research at crypto-custodian Copper Technologies Ltd.

“Enthusiast buyers bring in more enthusiast buyers pushing prices further up. The cryptocurrency has momentum on the back of several green weeks and has a large chance of going up further when markets see weekly movements upwards of 10% (as we saw last week).”

The upcoming Bitcoin halving, due this April, is also contributing to the positive sentiment in the crypto world. The halving reduces the quantity of Bitcoin that miners receive for operating the powerful computers that verify transactions on the blockchain. Historically, this event has often been viewed as a support for prices.

In addition to ETF inflows, the Lunar New Year holidays currently being celebrated in Asia typically generate a positive sentiment around Bitcoin, as stated in a note by Fundstrat Global Advisors.