On Tuesday, investors in cryptocurrencies celebrated as the price of Bitcoin hit a record high of over $69,000. After a 2022 industry a downturn that damaged the reputation of cryptocurrency and sent some large enterprises into bankruptcy, believers saw it as a moment of vindication.
But has cryptocurrency truly made a comeback? There are significant differences between this bull run and the frenzy that drove cryptocurrency prices to earlier highs, even if the data indicates the business is beginning to thrive once more.
Here’s what you need to know about the new crypto surge.
Why have cryptocurrencies collapsed in the past?
The last time Bitcoin hit a record was in November 2021, when cryptocurrencies became a cultural phenomenon. Cryptocurrency executives dated celebrities and their companies ran massive marketing campaigns with Super Bowl commercials.
In the spring of 2022, some of the most famous crypto companies were exposed as fraudsters and their prices plummeted. People who had put their savings into cryptocurrencies lost everything. The decline peaked in November 2022 when the cryptocurrency exchange FTX, founded by Sam Bankman Fried, collapsed due to a bank run, costing customers $8 billion.
Since then, Bitcoin has continued to rise. After hitting a low of around $16,000 following the FTX implosion, the cryptocurrency’s price rose to $69,000.
How has Bitcoin recovered?
A major turning point for the cryptocurrency industry follows a court ruling paving the way for financial companies to offer new investment products linked to the price of Bitcoin8 I visited the moon. The product, called an exchange-traded fund (ETF), gave investors the opportunity to gain exposure to cryptocurrencies without directly owning them.
Essentially a basket of assets divided into E.T.F. stocks. The launch of his Bitcoin ETF, in which investors buy stocks rather than the asset itself, allows cautious investors to buy a virtual currency without having to worry about setting up a digital wallet or parking their savings in a shady startup. It meant being able to jump into the currency market.
The effect was immediately noticeable. Since the ETF launched in January, more than $7.5 billion in investments have flowed in, pushing up the price of Bitcoin.
What’s the difference in this increase?
Cryptocurrency boomed in 2021, but that rise was at least partially driven by everyday investors who hunkered down during the pandemic as a new hobby. The driving force was turning to online investing. They bought so-called meme coins, cryptocurrencies based on online jokes, and stored their digital savings in a new type of crypto bank with a questionable business model. Non-fungible tokens, crypto-based collectibles known as NFTs, also rose in price.
Bitcoin is leading the way this time. Other tokens are also rising in value, but not reaching previous highs (although there is a resurgence of interest in meme coins). And Bitcoin’s rise has been fueled by support from major financial institutions such as BlackRock and Fidelity, which offer Bitcoin ETFs.
Michael Anderson, founder of cryptocurrency investment firm Framework Ventures, said 2021 is “It definitely is very different.” “It’s possible this is going to be an institutionally led cycle.”
So, have cryptocurrencies really returned?
Cryptocurrency advocates say Bitcoin’s rise is just the beginning. They envision significant gains in the coming months that could push the cryptocurrency’s price above $100,000.
Even if they are correct, it does not necessarily mean that the industry as a whole will prosper. Federal regulators have more or less given up on people in the United States trading Bitcoin. However, they are hostile to other digital currencies and the platforms that offer them.
The Securities and Exchange Commission has filed a lawsuit against Coinbase, the largest exchange in the United States, and several other large companies. The results of these lawsuits are still pending in court and could determine whether cryptocurrencies can continue to grow in the United States.
