Bitcoin continued its weekend rally by breaking above $40,000. This morning a Bitcoin on the Bitstamp trading platform cost $41,343, around three and a half percent more than yesterday. In the afternoon the price rose even further to over $42,000. The virtual currency now has a total market value of more than $800 billion.
Growing interest from major investors
Around a year ago, Bitcoin had reached an interim low. After interest rate increases by the central banks, the failed crypto projects Terra (Luna) and Celsius as well as mass job cuts at companies in the industry, the bankruptcy of the crypto exchange FTX in November 2022 was the last straw.
The fraud scandal led to a loss of investor confidence and the market capitalization of the entire sector collapsed. The Bitcoin price also fell to almost $15,000. However, the oldest and most important cryptocurrency then started a recovery course.
The price is now at its highest level since April 2022. Bitcoin is still a long way from its record high of around $69,000 in November 2021. However, in the eyes of many investors, the image problem now appears to have been resolved. The digital currency is supported by growing interest from large investors.
Falling interest rates are also driving the price
In general, digital currencies have been benefiting for a while from the prospect of Bitcoin-based ETF funds being approved in the USA. Experts currently believe that approval by the US Securities and Exchange Commission at the beginning of next year is quite likely. Such a step would probably significantly boost demand for Bitcoins and represent a step towards general acceptance.
There is also the hope that key interest rates may soon fall given the recent fall in inflation rates. A speech by US Federal Reserve Chairman Jerome Powell recently gave further fuel to investors’ interest rate expectations. Although he reiterated the willingness of the Federal Reserve to raise interest rates further if necessary, he also said that monetary policy was already quite restrictive.
Against this background, US labor market data this Friday will be important. The development of the labor market plays a major role in the Fed’s monetary policy as an indicator of the strength of the economy, but also of inflationary pressure. Falling interest rates are also making investments such as cryptocurrencies, which are considered very risky, more attractive again than bonds.