Plus500 does not provide CFD services to residents of the United States. Visit our U.S. website at us.plus500.com.

Bitcoin Surges Amidst Regulatory Optimism

Plus500 | Tuesday 02 January 2024

Bitcoin's climb past $45,000 on Tuesday, January 2nd, marks a promising start to the year, buoyed by expectations surrounding a potential spot bitcoin ETF approval. 

However, lingering regulatory uncertainties persist following significant legal cases involving industry figures. 

While the market displays resilience, the ongoing struggle between Crypto and regulators leaves the industry in a state of uncertainty amid its recent upturn.

An illustration of Bitcoin prices

New Year’s Climb

Bitcoin (BTCUSD) surged above $45,000 on January 2nd, a level unseen since the spring of 2022, signaling a robust start to the New Year driven by optimism. Bitcoin hit this 21-month high after gaining 3.6% as of the time of the writing. Ethereum (ETHUSD) also saw a rise of 3% on Tuesday, reaching a value of over $2,400 as of the time of writing.

Investor attention may be centered on the possibility of the U.S. securities regulator approving a spot bitcoin ETF. This approval could significantly expand Bitcoin's accessibility to millions of investors and attract billions in investments. While the Securities and Exchange Commission (SEC) has previously rejected multiple spot bitcoin ETF applications, there are signs suggesting that approval for some of the proposed ETFs may come as early as later this week.

The SEC’s ruling could have a large impact on the market; with analysts foreseeing that a rejection may lead to a swift drop in the value of Crypto coins, while approval could lead to either another sell-off or, alternatively, prompt further upward movement. Nonetheless, it is important to keep in mind that these are speculations and that only time will tell what the future holds for the Crypto market. (Source: Reuters)

Cryptocurrencies have benefited from increasing speculation that major central banks might reduce interest rates in 2024, a potential policy that may also have made a contribution toward a more positive Crypto market mood following the collapse of FTX and other players in the industry in 2022. Let’s take a closer look at what might be behind the SEC’s decision-making:

Regulatory Woes

The fall of FTX's CEO, Sam Bankman-Fried, concluded three months ago with a conviction on seven charges. Just weeks afterward, the plea deal reached with Binance's CEO, Changpeng Zhao, highlighted regulators' crackdown on the industry. Although on the face of it, it may have seemed that the prospects for Crypto were gloomy, these events actually set the stage for digital coins' recent rise as it looked like the United States' regulatory bodies were 'weeding out' bad actors in the industry.

The market reacted positively to these developments, with survivors of the fallout like Coinbase (COIN) witnessing a huge increase in share value toward the end of 2023. Additionally, with major financial firms like BlackRock (BLK) and Fidelity (FIS) pushing for the aforementioned spot bitcoin ETF, the doors to Bitcoin trading may soon be thrown open for more conventional traders.

However, the SEC's scepticism persists regarding the crypto market's susceptibility to manipulation, despite a court ruling favouring Grayscale Investments against the SEC's rejection of its application. The SEC continues its lawsuits against major crypto players like Coinbase, Kraken, and Gensler, the SEC Chair, remains wary, likening crypto to the "Wild West." The lack of clear regulations further complicates the landscape, leaving the industry in a regulatory limbo.

Conclusion

Looking ahead, it seems uncertain whether and how Bitcoin and other Cryptocurrencies will emerge from no-man's-land. More stringent enforcement actions are anticipated, but meaningful regulations seem unlikely in an election year like 2024. The struggle between regulators and the crypto industry remains unresolved, and it's anyone's whether the market's recent recovery will continue further into 2024.


This information is written by Plus500 Ltd. The information is provided for general purposes only, and does not take into account any personal circumstances or objectives. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. No representation or warranty is given as to the accuracy or completeness of this information. It does not constitute financial, investment or other advice on which you can rely. Any references to past performance, historical returns, future projections, and statistical forecasts are no guarantee of future returns or future performance. Plus500 will not be held responsible for any use that may be made of this information and for any consequences that may result from such use. Hence, any person acting based on this information does so at their own discretion. The information has not been prepared in accordance with legal requirements designed to promote the independence of investment research.

Need Help?
24/7 Support