Bitcoin has reached its highest price in almost 20 months, hitting over $42,000 on Monday, marking an 8.2 percent increase from the previous day. The surge is fueled by growing optimism that the toughest regulatory hurdles for the cryptocurrency industry are behind, and anticipation that US regulators will soon approve stock market cryptocurrency funds.

Investors are flocking to the digital asset, which has witnessed a remarkable 20 percent climb in value over the last month. This upward momentum is attributed to investors seeking riskier assets amid speculation that the US Federal Reserve is gearing up to cut interest rates next year, despite the central bank’s insistence that such speculations are premature.

Traders note that the recent surge in buying digital tokens is also linked to increased interest from larger institutions. The closure of two high-profile criminal cases, including the successful prosecution of Sam Bankman-Fried, former CEO of FTX, and Binance, the world’s largest crypto exchange, has alleviated concerns that loomed over the market for the past year. Notably, Binance, despite facing penalties, was not shut down by US authorities.

Henri Arslanian, co-founder of Nine Blocks Management, a crypto hedge fund manager based in Dubai, emphasized that institutional investors had been waiting for closure on FTX and clarity around Binance before considering reentry into the crypto space.

In addition to Bitcoin’s surge, Ethereum, the second most actively traded cryptocurrency, rose by 8.3 percent to $2,260 on Monday, reaching its highest level since May of the previous year.

Investors are now hopeful that the Securities and Exchange Commission (SEC) will approve an exchange-traded fund (ETF) for Bitcoin in the coming weeks. Previously, the SEC had rejected spot Bitcoin ETFs for a decade, but there is growing optimism as major players like BlackRock and Franklin Templeton join the ranks of companies submitting filings with the SEC.

The cryptocurrency market is abuzz with ETF speculation, and market analysts anticipate that it will continue to influence behavior in the crypto market. Simon Peters, a market analyst at eToro, remarked that investors are buying into the narrative of how opening the market to institutional investors through ETFs could transform the cryptocurrency ecosystem.

As the SEC continues its year-long crackdown on crypto, including enforcement actions against groups like US-listed exchange Coinbase, pressure is mounting on the regulator to approve a Bitcoin spot ETF. This comes after crypto asset manager Grayscale achieved a significant legal victory, with a federal appeals court ruling that the SEC was wrong to reject its application to convert its flagship Grayscale Bitcoin Trust into an ETF.

In a parallel development, gold prices have also surged to an all-time high, reaching $2,135 per troy ounce on Monday. The rise is attributed to a fall in the US dollar, with traders speculating on potential interest rate cuts by the Federal Reserve next year. The recent rally in gold prices is part of a broader trend that began in November of the previous year, driven by central bank purchases and geopolitical uncertainties.

Analysts caution that sustained buying from a broader range of market participants is essential for gold to consistently trade above the $2,075 per troy ounce mark. The market will be closely watching for developments in both the cryptocurrency and precious metal sectors as investors navigate shifting economic landscapes.
By: Delino Gayweh
Serrari Financial Analyst
4th December, 2023