Bitcoin surged above $45,000 on Tuesday, reaching its highest level since April 2022. This strong start to the New Year was driven by the hopes surrounding the potential approval of exchange-traded spot bitcoin funds.
Bitcoin peaked at $45,532, marking a 21-month high and ending 2023 with a remarkable 156% gain, its strongest annual performance since 2020.
Currently, it is up 3.5% at $45,727, although it remains significantly lower than its all-time high of $69,000 reached in November 2021.
Additionally, Ether, the cryptocurrency connected to the ethereum blockchain network, saw a 2.6% increase on Tuesday, reaching $2,414. In 2023, Ether reached a surge of 91%.
The prices of crypto stocks that closely follow bitcoin reached a significant increase in U.S. premarket trading. Riot Platforms, Marathon Digital, and CleanSpark all saw gains between 11.3% and 14.8% after experiencing steep declines in the final trading days of 2022.
Coinbase, a U.S. crypto exchange, saw a rise of 6.3% in its stock price, while software firm and bitcoin investor MicroStrategy saw an increase of 9.4%.
Investors are closely monitoring the U.S. securities regulator's decision regarding the approval of a spot bitcoin ETF. If approved, this would allow millions more investors to enter the market and attract billions in investments.
The U.S. Securities and Exchange Commission has previously rejected several applications for spot bitcoin ETFs, citing concerns about the vulnerability of the cryptocurrency market to manipulation.
However, in recent months, regulators have shown signs of being willing to approve at least some of the 13 proposed spot bitcoin ETFs. It is expected that a decision will likely be made in early January.
According to Chris Weston, the head of research at Pepperstone, if the proposed ETFs are rejected, it would lead to a clear and immediate decline in the market. On the other hand, if they are approved, there is uncertainty whether it would result in a "buy-the-rumour, sell-on-fact" scenario or if it would further drive the market upwards.
Furthermore, the increasing belief that major central banks will cut interest rates this year has been beneficial for cryptocurrencies. This has helped dispel the negative sentiment that had been weighing down the crypto markets after the collapse of FTX and other crypto-business failures in 2022.
According to Markus Thielen, the founder of digital asset research firm 10x Research, the crypto markets have the potential to experience additional growth in 2024. This is because bitcoin has historically demonstrated positive performance during U.S. election years, which aligns with the occurrences of bitcoin halving cycles in 2012, 2016, and 2020.
