What Is Driving the Rise in Cryptocurrency Value?

On Tuesday, Bitcoin soared to new heights, setting another benchmark in its continually fluctuating narrative as the preeminent virtual currency.

The value momentarily surpassed $69,000, eclipsing its previous record of $68,990.90 reported on Nov. 10, 2021, as per data from CoinDesk’s Bitcoin Price Index highlighted by the Wall Street Journal.

The ascent of Bitcoin’s value over the previous year has been significant, spurred in part by authorizations for Bitcoin exchange-traded funds (ETFs).

Historically, average investors looking to partake in digital currency trading typically needed to navigate crypto exchange platforms, which often posed a deterrent for those not adept in handling Bitcoin.

This landscape transformed in January, with the enactment of regulations by federal authorities enabling American investors to trade spot Bitcoin ETFs just like they would stocks.

This regulatory change has democratized Bitcoin investment, reaching a broader segment of the U.S. populace, including those who were previously unsure about Bitcoin’s mechanics or its trading process. Consequently, vigorous trading ensued.

The U.S. Securities and Exchange Commission’s vote greenlit public sales of ETFs.

Nathan McCauley, the CEO and co-founder of Anchorage Digital, remarked that Bitcoin reaching its record price “signals a pivotal moment for cryptocurrencies,” adding, “This is just the start of what happens when the market gains trusted, safe, and compliant access to this asset class—with institutional engagement just beginning.”

Public Trading Enabled by SEC’s Sanction of Bitcoin ETFs

For those new to the concept, ETFs, similar to mutual funds, are managed collections of assets such as stocks, bonds, or commodities, that are traded throughout the day on stock exchanges, mirroring the performance of a specific index or assortment of assets, unlike mutual funds which price once per day.

Expectations surrounding the SEC’s decision contributed to the price hike of Bitcoin, known for its dramatic price swings. The cryptocurrency had hovered around $17,000 at the commencement of the previous year.

The new spot Bitcoin ETFs are traded on platforms recognized for stringent regulations, such as Nasdaq, the New York Stock Exchange, and the Chicago Board Options Exchange, as referenced by Reuters.

Investors, according to advisers, can gain profits from Bitcoin’s potential reapings by investing in a spot Bitcoin ETF without the risks associated with direct Bitcoin ownership.

Direct Bitcoin ownership involves securing it in a digital wallet. Managing the wallet requires the safeguarding of cryptographic keys, which are encrypted sequences that facilitate crypto transactions, as detailed by Investopedia. These wallets, while functional, are prime targets for cybercriminals and currently operate outside the realm of federal oversight.

In the past, the federal securities watchdog had dismissed the possibility of publicly traded bitcoin ETFs, over concerns of vulnerability to manipulation and fraudulent activities. Nonetheless, the sector has advocated for ETF trading for well over a decade, as reported by Reuters.

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Fidelity and BlackRock Among the Bitcoin ETFs Approved for Trading

This year witnessed the accreditation of 11 issuers’ applications, including premier investment companies like BlackRock and Fidelity.

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Nonetheless, there was opposition within the SEC as two of the five commissioners disagreed with the decision. Commissioner Caroline Crenshaw, affiliated with the Democratic party, referred to the decision as “irresponsible and unprecedent” in an official comment.

USA Today’s personal finance correspondent, Daniel de Visé, is responsible for this coverage.