Bitcoin is in the midst of another head-scratching rally.
Bitcoin is in the midst of another head-scratching rally.
The world’s largest cryptocurrency began climbing late last week after spending much of the summer stuck around $26,000. It rose above $30,000 over the weekend, briefly topped $35,000 in recent days to touch its highest level since May 2022, and is now hovering around $33,800.
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The world’s largest cryptocurrency began climbing late last week after spending much of the summer stuck around $26,000. It rose above $30,000 over the weekend, briefly topped $35,000 in recent days to touch its highest level since May 2022, and is now hovering around $33,800.
As is the case with most debates in the crypto world, there is little consensus about what’s behind the sudden surge.
Some crypto bulls point to signs that a slate of exchange-traded funds that hold actual bitcoin—known as spot bitcoin ETFs—will soon be approved by U.S. regulators. That would enable investors to buy and sell bitcoin through a brokerage account as easily as shares of stock.
“There’s a lot of pent-up demand for these products,” said Matthew Sigel, head of digital assets research at VanEck, which is one of a dozen asset managers with a pending spot bitcoin ETF application.
Others credited crypto advocate Rep. Tom Emmer’s bid to become House Speaker for bitcoin’s latest rally. But even after he withdrew from the contest, bitcoin kept climbing.
Another popular theory is tied to bitcoin’s upcoming “halving,” an adjustment to the blockchain that literally cuts in half the reward miners receive for processing transactions and creating new bitcoin. Crypto enthusiasts argue the token can be considered as a store of value with limited supply.
“People across the spectrum are looking for reasons to believe,” said Bobby Zagotta, chief executive of crypto exchange Bitstamp USA. “They’re looking for signs of health in this market.”
The only things that are certain? Bitcoin is a highly volatile and speculative investment, prone to wild swings in price. After a quiet summer of low volatility and trading volumes, the market appears to have risen from its slumber.
Here’s how bitcoin’s latest surge is rippling through the crypto industry:
The rally has helped lift crypto-related stocks and other tokens.
Shares of Coinbase Global rallied Monday and Tuesday before giving up their gains.The stock has doubled in 2023 but is down 80% from its 2021 high. Coinbase is listed as the custodian on the applications of several of the asset managers in the spot bitcoin ETF race. The exchange would be responsible for safekeeping the bitcoin and receive a fee based on the total value of the funds’ assets.
Despite the stock rally, the outlook for Coinbase is murky. The SEC sued the company in June, saying it violated rules that require it to register as an exchange and be overseen by the federal agency. The company is slated to report its third-quarter results Thursday.
Among the other stocks on the move are MicroStrategy, a software intelligence company that holds more than 150,000 bitcoin. Shares have gained 17% over the past week. Bitcoin miners Marathon Digital and Riot Platforms have jumped 14% and 7.6%, respectively.
Other tokens including ether, dogecoin and solana have climbed as well.
The Grayscale Bitcoin Trust
The $21 billion Grayscale Bitcoin Trust, the world’s largest bitcoin fund, is also seeking approval to convert to a spot bitcoin fund. It is currently trading at a 16% discount to the underlying value of the bitcoin it holds, versus 42% in mid-June and nearly 50% at the end of last year, according to YCharts. Crypto enthusiasts see the narrowing spread as a bullish indicator of its chances for approval.
An appeals court ordered the SEC in August to reassess Grayscale’s application and approve or reject it on fresh grounds.
The fund’s shares have risen 6% in the past week and have more than tripled in 2023.
Although individual investors appear to have powered the recent rally, institutional interest in bitcoin futures has also steadily climbed. The number of unsettled and active bitcoin futures contracts trading on the Chicago Mercantile Exchange, known as open interest, hit a record of more than 20,000 contracts on Monday.
The open interest on the CME, a venue favored by big investors, was equivalent to 100,000 bitcoin with $3.4 billion in notional value, according to the CME.
Spot bitcoin trading volumes have recovered after plummeting in September to their lowest levels of the year. Higher volumes tend to translate into stronger liquidity, which means that investors have a better chance of trading bitcoin quickly at quoted prices.
The rebound has helped bitcoin reclaim its dominance in the crypto market. The market value of bitcoin stands at about $660 billion, accounting for more than half of the $1.25 trillion total crypto market.At nearly $34,000, the price of bitcoin has more than doubled this year—and has halved from its peak at nearly $69,000 in November 2021. A return to May 2022 levels brings bitcoin back to where it was trading ahead of the $40 billion wipeout of a pair of cryptocurrencies, the bankruptcies of several crypto lenders and the fall of exchange FTX.
Write to Vicky Ge Huang at vicky.huang@wsj.com
