Bitcoin tops $40,000 for first time since May 2022 as momentum builds

Bitcoin has broken above $40,000 for the first time since May 2022 as it rides a wave of momentum on broad enthusiasm about US interest rate cuts and as traders bet on the imminent approval of US stock market-traded bitcoin funds.

The world’s biggest cryptocurrency hit as high as $41,748 on Monday, its highest since April 2022, seemingly casting off the funk that had settled over crypto markets following the collapse of FTX and other crypto-business failures last year.

It was last up four per cent at $41,627. Its 50 per cent rally since mid-October has “seemed to mark a decisive shift away from the bearishness of 2022 and early 2023,” said Justin d’Anethan – head of business development for Asia-Pacific at Keyrock, a digital assets market making firm.

D’Anethen said evidence of institutional buying through November showed a new leg of interest and that although reversals ahead were not inconceivable, lows hit around $16,000 a year ago “probably marked the bottom”.

Bitcoin is up by over 150 per cent so far this year.

Bitcoin-investor Microstrategy last week disclosed it bought an additional $593m in bitcoin during November.

Meanwhile, riskier investments and other interest-rate sensitive assets, such as gold, have also rallied hard over the last few weeks as markets wager that the US Federal Reserve has finished hiking rates and will start cutting early in 2024.

Reports in October that the US Securities and Exchange Commission won’t appeal a court ruling that found the agency had been wrong to reject an exchange-traded fund application have also driven bets that an eventual approval is near.

A spot bitcoin ETF could allow previously wary investors access to crypto via the stock market, ushering a new wave of capital into the sector.

Investors have also welcomed the settlement of a years-long US criminal probe into Binance, the world’s largest crypto exchange and a key cog in the worldwide crypto market. The deal, which saw Binance founder Changpeng Zhao step down after pleading guilty to breaking US anti-money laundering laws, allows the company to continue operating.

Ether, the coin linked to the Ethereum blockchain network, also rose to a one-and-a-half-year high on Monday, hitting $2,264.

Both bitcoin and ether remain far below their record highs, hit in 2021, of $69,000 and $4,868 respectively.