Bitcoin (BTC-USD), the dominant cryptocurrency, crossed $42,000 on Monday, hitting a yearly high. It appeared as if he had put a series of recent scandals behind him that have weighed heavily on digital assets.
Investor sentiment has become more optimistic in recent weeks, driving up the value of digital tokens and shares of crypto companies. Supporters are particularly interested in the possibility that regulators could approve a crypto exchange-traded fund that would give investors greater exposure to digital assets without taking on the full risk of owning those assets directly. The Securities and Exchange Commission is expected to comment on the filings next month.
So far this year, Bitcoin is up more than 150%, taking other tokens and players along with it. Ethereum, the second largest cryptocurrency by market cap, is up more than 80%.
Profits also flow to the listed companies in the industry. Coinbase (COIN), which benefited enormously during the turbulent trading days of the COVID lockdown, is enjoying another sunny moment. The platform's share price has increased more than fourfold since the beginning of the year. And Marathon (MARA), the digital asset company that mines cryptocurrencies, has more than tripled its stock price year to date.
Markus Thielen, head of research at DeFi Research.com, recently told Yahoo Finance Live that ETF approvals could push the price of Bitcoin to nearly $60,000 as investors shift some of their funds into cryptocurrencies. With institutional investors investing hundreds of billions in ETFs, transferring even a small percentage of those funds would result in significant profits, he said.
“There are about $120 billion worth of precious metals ETFs in the US – so that means gold and silver – and if you convert just 10-20% of that into Bitcoin, you get something on the order of about $100 billion “$25 billion inflow,” Thielen said.
The Bitcoin rally shows that investors may be putting recent crypto scandals behind them. (STRF/STAR MAX/IPx 202/`) (STRF/STAR MAX/IPx)
The increasingly popular belief on Wall Street that the Fed has likely completed its rate hike campaign, as well as pent-up demand, are also driving the rise in cryptocurrencies, he said.
The story goes on
The rally in cryptocurrencies towards the end of the year also illustrates what industry leaders say: the sector is putting its difficult past behind it. Last month, Changpeng Zhao, the founder of the world's largest crypto exchange Binance, pleaded guilty to federal money laundering charges and resigned as CEO. The plea came shortly after the high-profile conviction of FTX co-founder Sam Bankman-Fried.
Last month, a federal court in Manhattan found Bankman-Fried guilty of defrauding his customers, investors and lenders, concluding that there had been a dramatic downturn for the 31-year-old entrepreneur. But as he presided over the largest crypto collapse in history, his beliefs took on a deeper meaning and represented what critics saw as the industry's penchant for fraud and illegal activity.
While more litigation awaits Bankman-Fried, markets are already moving.
Hamza Shaban is a reporter for Yahoo Finance covering markets and economics. Follow Hamza on Twitter @hshaban.
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