FILE – An advertisement for Bitcoin cryptocurrency is displayed on a street in Hong Kong, on Feb. 17, 2022. The European Union’s sweeping set of beefed-up cryptocurrency rules got final approval from member states on Tuesday, giving the bloc a global lead in regulating the freewheeling sector. The European Council adopted the package of rules, known as Markets in Crypto Assets, or MiCA, in the final step in the 27-nation bloc’s legislative process. (AP Photo/Kin Cheung, File)
(NewsNation) — Cryptocurrency prices are on the rise after a so-called “crypto winter” that was deepened by the collapse of the FTX exchange last year.
Bitcoin was trading at around $42,400 on Tuesday, up from around $16,500 at this same time last year, according to CoinDesk. The digital currency has been on a significant rebound in 2023 following a sharp decline from its all-time high of around $68,000 in November 2021.
Ethereum, another major coin, is up around 85% from this time last year.
Bitcoin and other cryptocurrencies took a major blow in November 2022 following the collapse of FTX, the exchange founded by Sam Bankman-Fried. The former CEO was arrested on charges of fraud and money laundering, and he was convicted last month.
But now, after all the tumult, there is “reason for optimism,” one analyst told NPR.
Investors are keeping a close eye on the U.S. Securities and Exchange Commission, which could approve a Bitcoin spot ETF in January. An ETF is a pooled investment security that can be bought and sold like stocks.
The SEC has previously denied applications for a crypto investment fund, but a federal judge earlier this year sided with investment firm Grayscale Investments in ruling that the SEC wrongly denied its application.
Industry advocates say this new way of investing in bitcoin at spot prices, instead of futures, could make it easier for anyone to enter the cryptoverse while lowering some of the well-documented risks associated with investing in cryptocurrencies.
“The longer-term catalyst (for bitcoin) is a lot of optimism related to the potential approval of a spot ETF,” Kaiko research analyst Riyad Carey recently told the Associated Press. He noted, however, that a regulatory green light doesn’t promise continued gains.
Despite the recent excitement around bitcoin, experts still maintain that crypto is a risky bet with wildly unpredictable fluctuations in value. In short, investors can lose money as quickly as they make it.
Last year’s collapse of crypto exchange giant FTX also “left a big scar” on the public’s confidence in the crypto industry and crushed retail investors, Edward Moya, a former senior market analyst at Oanda, previously told The Associated Press — noting that institutional money, like hedge funds, are behind the bulk of current crypto investing.
The outlook for crypto may also be complicated by lawsuits. The SEC has filed lawsuits against exchanges Coinbase and Kraken, and the regulator was not part of a settlement with Binance, whom the SEC alleges misled investors.
Kevin Werbach, a professor at Wharton, told NPR he expects to see more enforcement actions this year.
“It takes time to build these cases — especially the major ones against these big players who are nominally not based in the United States,” he told the news outlet.
While a crypto comeback may unfold, experts advise investors to proceed cautiously.
Carey said liquidity in cryptocurrency markets has yet to return to where it was before FTX collapsed, and lower liquidity can exacerbate price fluctuations.
“In the past few months, that has normally been the price moving up — but people should always be aware it can go in the reverse and quickly,” he said.
The Associated Press contributed to this report.
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