Bitcoin rose on Monday, briefly surpassing $42,000 to reach a 20-month high, in a new surge of momentum fueled by the possibility of U.S. interest rate cuts and traders betting that the U.S. will soon approve exchange-traded spot bitcoin funds.
The world’s biggest cryptocurrency rose as high as $42,162 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 up 6.49% at $41,311.26 as of 1605 GMT.
Bitcoin’s gains lifted the shares of cryptocurrency-related companies, as well as exchange-traded funds (ETFs) listed in the United States.
Coinbase jumped 6.5% and Microstrategy gained nearly 6%, while bitcoin miners such as Riot Platforms, Marathon Digital and CleanSpark rose between 8% and 11%. Last week, Microstrategy disclosed it bought an additional $593 million in bitcoin during November.
The ProShares Bitcoin Strategy ETF , which tracks bitcoin futures, rose 7.3%, while the ProShares Short Bitcoin Strategy ETF that allows traders to bet on a fall in bitcoin futures dropped 7.3%.
Bitcoin’s “remarkable ascent” can be attributed to a “confluence of factors”, that were buoying sentiment, Luuk Strijers, Chief Commercial Officer of crypto derivatives exchange Deribit, wrote in a note on Monday.
Those included widespread optimism that the U.S. securities regulator may soon approve a spot bitcoin ETF, which would throw open the bitcoin market to millions more investors; abating inflation, which would lead central banks to begin easing rate hikes, making riskier assets more attractive; and the steady increase in institutional engagement.
Bitcoin is up by more than 150% so far this year.
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 U.S. Federal Reserve has finished hiking rates and will start cutting early in 2024.
Reports in October that the U.S. Securities and Exchange Commission (SEC) would not appeal a court ruling that found the agency had been wrong to reject its spot bitcoin ETF application have also driven bets that an eventual approval is near.
SEC chair Gary Gensler said in October that the agency’s commissioners would potentially consider as many as 10 bitcoin ETF filings, but could not provide guidance on timing.
A spot bitcoin ETF could allow previously wary investors access to crypto via the tightly-regulated stock market, ushering a new wave of capital into the sector.
Geoff Kendrick, head of digital assets research at Standard Chartered, said bitcoin’s recent gains were “mostly due to expectations of spot ETFs coming to fruition” in the United States, which he expected to happen in the first quarter of 2024.
Investors have also welcomed the settlement of a years-long U.S. 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 U.S. anti-money laundering laws, allows the company to continue operating.
Ether , the coin linked to the Ethereum blockchain network, also rose on Monday, hitting $2,274.
Both bitcoin and ether remain far below their record highs, hit in 2021, of $69,000 and $4,868 respectively.