[ad_1]
Despite a regulatory crackdown on crypto exchanges over the past year, the price of Bitcoin has steadily risen through most of 2023, currently hovering around $43,610, and since September The price has increased by nearly $18,000.
Bitcoin reached a high of around $68,000 in November 2021, but lost more than 75% of its value by November 2022 following the collapse of FTX, the largest cryptocurrency exchange at the time. Ta. And now it’s being bounced back again.
Other popular cryptocurrencies have followed similar trajectories, marking a remarkable turnaround for an industry hit by scandal. But why now?
Investors are buying up the cryptocurrency ahead of the long-awaited approval of the first spot Bitcoin exchange-traded fund in the United States, expected in late January.
Pending approval, a number of investment companies are expected to offer ETFs, led by BlackRock, the world’s largest asset manager.
An ETF is an investment fund that tracks the price of an underlying asset or index, in this case Bitcoin.
The advantage of Bitcoin or crypto ETFs is that they offer investors a way to profit from Bitcoin price fluctuations without directly owning the cryptocurrency.
If approved, crypto ETFs will be traded on traditional SEC-regulated exchanges such as the New York Stock Exchange and Nasdaq, according to CoinDesk.
This would open up the cryptocurrency market to a wider range of buyers who are not yet using cryptocurrency exchanges. Investors are returning to the market in anticipation of ETF approval, which is pushing up the price of Bitcoin.
“It really opens the door to all kinds of demand, and as demand goes up, prices go up,” said Douglas Bornperth, president of Born Fied Wealth and member of CNBC’s Financial Advisor Council. Boneparth invests in Bitcoin and other cryptocurrencies.
There are other factors as well. The Federal Reserve has signaled its rate hike cycle is over, a positive sign for the economy as inflation continues to decline. This has made riskier assets like cryptocurrencies more attractive to investors.
Another factor is Bitcoin’s expected halving in April. Halving is a built-in mechanism associated with Bitcoin mining that periodically reduces the supply of tokens. As the supply of Bitcoin decreases, demand is expected to increase further.
Breaking it down, the reasons behind the recent rise in Bitcoin prices are “60% due to Bitcoin ETFs, 20% due to the halving, and 20% due to the economic situation.”
However, “be careful of the relentless rise” [price] “The last few months seem to have a lot of good news in them,” said Owen Lau, executive director at financial services firm Oppenheimer & Company.
Cryptocurrencies are widely viewed as speculative assets that do not derive their value from an underlying entity. It is also very volatile, with daily price fluctuations of 5% to 10%. There is no guarantee that current values will be maintained.
Therefore, financial planners usually advise against investing more than you can afford to lose.
“Bitcoin has been the best-performing asset class over the past 10 years,” Vonepers said. “But owning that performance comes with tremendous risk.”
Don’t miss: Want to be smarter and more successful with money, work, and life? Sign up for our new newsletter.
obtain CNBC’s Free Warren Buffett Investing GuideThis book compiles the millionaire’s #1 advice for everyday investors, the dos and don’ts, and three key investment principles into a clear and simple guidebook.
[ad_2]
Source link
