Kryptobiz is in the dump. So why is bitcoin suddenly flying high?

Although the cryptocurrency industry remains overshadowed by recent explosions and controversies, the world’s most important token – bitcoin – is making a comeback.

The value of bitcoin rose to nearly $42,000 on Monday, marking the first time the digital currency broke $40,000 in 18 months, price tracker CoinDesk Indices shows.

The resurgence contrasts with the questions that have dogged the sector since last year’s spectacular breakout of crypto exchange FTX, which led to the conviction of November founder Sam Bankman-Fried on seven counts of fraud. Also last month, Binance – the world’s largest cryptocurrency exchange platform – agreed to pay $4.3 billion after admitting it violated US anti-money laundering laws and sanctions violations, with CEO Changpeng Zhao pleading guilty to a federal charge.

Despite such scandals, the price of bitcoin has risen 150% this year, although it is still down from a peak of around $69,000 in late 2021.

What is bitcoin again?

Bitcoin is the first cryptocurrency and was created in 2009. Cryptocurrencies are digital tokens that use peer-to-peer technology to facilitate instant payments without the need for a third party such as a bank or payment processor, according to to bitcoin’s pseudonymous creator, Satoshi Nakamoto.

Unlike traditional money, cryptocurrencies can be used to buy goods and services on the Internet, in addition to being held as investments (like stocks). However, crypto prices are notoriously volatile and investing in any form of crypto can be risky, according to to the investment company Charles Schwab.

There are more than 11,000 cryptocurrencies, but bitcoin is the most valuable (measured in dollars), in addition to having the largest market capitalization of any digital asset, data from crypto price tracker CoinGecko shows.

Why is bitcoin rising now?

Several factors are driving bitcoin’s recent rally. Perhaps most important are signs that major investment firms are set to gain regulatory approval to offer spot bitcoin exchange-traded funds — a pooled investment security that can be bought and sold like stocks. Federal regulators are expected to greenlight several bitcoin ETFs as early as January, which could make investing in crypto more accessible to investors, Yiannis Giokas, a senior product director at Moody’s, told CBS MoneyWatch.

“As more and more managers venture into the bitcoin spot ETF space, more retail and institutional investors, even the more conservative ones, will feel a greater level of comfort investing in this space,” he said.

Bitcoin prices are also benefiting from a growing belief on Wall Street that the Federal Reserve is done raising its benchmark interest rate now that inflation is slowing, and that the central bank could even begin to loosen monetary policy in mid-2024 to keep the economy on track.

Binance CEO pleads guilty to federal charges


When interest rates fall, investors are more likely to pour money into riskier assets such as crypto.

“Lower rates are bullish for bitcoin,” Greg Magadini, director of derivatives at crypto data firm Amberdata, told CBS MoneyWatch.

Giokas believes that 2024 could be a banner year for bitcoin, a proxy for how well the crypto market as a whole is doing.

Bitcoin “hit $40,000 for the first time in 2021, and each time it was followed by a bull run, so it’s a logical expectation from the markets that another run is coming,” he said.

— The Associated Press contributed reporting.

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