Wall Street Cheers as Bitcoin Breaks the Chains, Soars Above $45,000 in New Year's Rally

With hope around the potential approval of exchange-traded spot bitcoin funds, the world's largest cryptocurrency, Bitcoin, kicked out the New Year with a bang on Tuesday, surging above $45,000 for the first time since April 2022.

With its highest year performance since 2020, Bitcoin gained 156% last year and reached a 21-month high of $45,532. It is still far from the record high of $69,000 it reached in November 2021, even if it was up 3.5% at $45,727 as of late.

After rising 91% in 2023, ether, the token associated with the Ethereum blockchain network, was 2.6% higher at $2,414 on Tuesday.

Following significant declines in the last trading days of 2022, cryptocurrency stocks-which closely follow the price of bitcoin-soared in U.S. premarket trading, with Riot Platforms, Marathon Digital, and CleanSpark rising between 11.3% and 14.8%.

Software company and bitcoin investor MicroStrategy gained 9.4%, while the US cryptocurrency exchange Coinbase increased 6.3%.

Spot Bitcoin ETF?

The main concern among investors has been whether the U.S. securities regulator would soon authorize a spot bitcoin ETF, which would attract billions of dollars in investments and open up the market to millions more people.

In recent years, the U.S. Securities and Exchange Commission has denied many requests to introduce spot bitcoin exchange-traded funds (ETFs), citing concerns about market manipulation. However, there have been more indications in recent months that authorities are ready to approve at least some of the 13 planned spot Bitcoin ETFs.

According to the two executives who attended the discussions with SEC officials on Thursday, the agency stated it may approve the proposal in the first few working days of 2024. In order to accomplish this, regulators would notify issuers immediately of the day on which their proposal to launch the ETF would become "effective"; on that day, each proposed ETF might be rolled out.

In recent days, a number of issuers have modified the technical specifications of their proposed exchange-traded funds. According to persons familiar with the situation, BlackRock and ARK both amended their filings earlier this week to permit cash redemptions, a move that was required by authorities.

Expense data would probably be included in any final changes. The only issuers who have revealed the 0.80% fee they plan to charge on their joint ETF are ARK and 21 Shares.

According to Chris Weston, head of research at Pepperstone, there would be an obvious and quick fall in response to a potential rejection.

Growing expectations that major central banks would lower interest rates this year have also helped cryptocurrencies recover, dispelling some of the pessimism that had enveloped the market after FTX's collapse and other 2022 crypto-business flops.

According to Markus Thielen, head of digital asset analysis firm 10x Research, Bitcoin tends to do well during U.S. election years, coinciding with cycles of the cryptocurrency's halving in 2012, 2016, and 2020, therefore crypto markets might continue their gains in 2024.