Bitcoin has finally reclaimed its trading point prior to the event that triggered the last major crypto crash, marking an 18-month journey to recovery. The dominant digital currency surged by as much as 4%, reaching $37,019 on Thursday, the highest level since May 5, 2022, before the collapse of the TerraUSD stablecoin set off a chain reaction of failures across the cryptoasset sector.
This resurgence comes nearly a year after FTX, the exchange founded by Sam Bankman-Fried, filed for bankruptcy. Markus Thielen, Head of Research at Matrixport, noted, “With Bitcoin trading back above the level when the Terra stablecoin imploded, crypto traders have officially moved on from those psychological scars.”
In contrast to previous boom cycles, Bitcoin’s recovery this year has been characterized by sporadic surges intertwined with extended periods of low volatility. This resurgence was achieved against the backdrop of the Federal Reserve implementing the most robust monetary tightening in four decades, coupled with the imposition of increasingly stringent industry regulations.
A series of narratives have driven, and attempted to explain, crypto’s remarkable resurgence: Bitcoin as a hedge against inflation, a haven from the US banking crisis in March, and most recently, the potential approval of Bitcoin exchange-traded funds (ETFs) by the US Securities and Exchange Commission (SEC). Bloomberg Intelligence analysts James Seyffart and Eric Balchunas noted that a brief eight-day window opened on Thursday for the SEC to “theoretically issue approval orders.” They added, “Even if approvals don’t arrive this month, we still believe there’s a 90% chance of approval by Jan. 10.”
The prospect of regulatory approval, after over a decade of deliberation, has propelled the token’s value up by over 120% this year. Caroline Mauron, Co-founder of Orbit Markets, a digital-asset derivatives liquidity provider, anticipates “sustained interest in bets on a further Bitcoin rally.”
This rally also signifies a departure from the legacies of figures linked to some of Bitcoin’s most significant setbacks. Bankman-Fried, once hailed as a crypto savior, was recently convicted of one of the largest financial frauds in US history. Meanwhile, Do Kwon, the South Korean creator of the ill-fated TerraUSD, faces legal troubles, having spent time in a Montenegrin jail and being sought by authorities in the US and South Korea on fraud charges.
FTT, the native token of the FTX exchange, has surged by nearly 90% in the past 24 hours, according to CoinGecko data, amid speculation about a potential reboot of the exchange. Advocates of cryptocurrencies are already crafting new narratives around Bitcoin’s enduring resilience. Josh Gilbert, Market Analyst at eToro, stated, “The ETF expectation is the top of a growing list of catalysts, which gives the current rally further legs.” Additionally, bets that the US Federal Reserve has concluded its current round of rate hikes and an upcoming Bitcoin-halving next year are adding fuel to the rally, Gilbert noted.
While Bitcoin is only halfway to regaining the heights of the 2021 crypto boom, when it reached nearly $69,000, JPMorgan analyst Nikolaos Panigirtzoglou cautioned that the crypto rally “looks overdone.” JPMorgan envisions a scenario in which existing capital shifts from established Bitcoin products like the Grayscale trust and Bitcoin futures ETFs, rather than fresh capital flowing into the crypto industry through the newly-approved ETFs.
The resurgence of Bitcoin to its pre-crash trading point stands as a testament to its enduring resilience and signals a potential turning point in its journey towards mainstream adoption.
Source: Bloomberg
