Bitcoin, the world’s largest cryptocurrency, has continued its gains, nearing its highest levels in 18 months, reaching a peak of $37,978 on Wednesday, the highest since May 2022. Meanwhile, Ethereum, the second-largest cryptocurrency, surged to its highest levels since April, hitting $2,136.50.
Digital asset prices rose amidst speculations about the imminent approval of an exchange-traded fund (ETF) for Bitcoin on the stock exchange, backed by BlackRock. Additionally, bullish interest rates supported the strong upward movement of cryptocurrencies.
Cryptocurrencies continue to perform well despite the Securities and Exchange Commission’s (SEC) decision to delay once again a verdict regarding the approval of the first US ETF directly investing in Bitcoin. However, Bloomberg Intelligence predicts greenlighting a group of such funds by January, facilitating institutional and retail investment in cryptocurrency.
On the other hand, the giant asset management company BlackRock began courting retail investors for an “Ethereum Fund,” increasing its bets on cryptocurrencies, amid the possibility of easing regulations related to such investment tools.
The “iShares Ethereum Trust,” which was registered last week, will allow investors to access the second-most popular cryptocurrency without owning it directly.
While futures-based cryptocurrency funds have already been approved by the US Securities and Exchange Commission, the regulatory authority has long emphasized that the instant cryptocurrency market is susceptible to fraud and manipulation.
However, in August, the Federal Appeals Court ruled that the SEC was wrong to deny asset management firm Grayscale Investments’ request to create a Bitcoin ETF. This historic victory led to a wave of applications to purchase instant investment instruments in recent months, helping restore some confidence in the cryptocurrency industry, which was shaken by several prominent collapses last year.
BlackRock entered the cryptocurrency arena by applying for a Bitcoin ETF in June.
On another note, separate analyses suggest an expected move in April to increase Bitcoin’s maximum available coins by halving its value, with the current maximum units standing at 21 million, 19 million of which have already been mined.
Gregory Lewis, an analyst at BTIG, which covers the top 13 Bitcoin mining companies listed in the US, stated, “You always see a lot of interest ahead of these halvings,” according to Reuters.
The mining difficulty, which measures the computational power required to mine the currency, reached an all-time high, according to blockchain.com. This means that miners must use more power and speed to increase cryptocurrency profits.
Analysts at JPMorgan estimate that mining difficulty has reached record levels for 11 consecutive months, including the historic increase in October last year.
Bitcoin prices typically rise following these halving events. After the first halving in 2012, the price jumped from $12 to $126 over six months. In the second half of 2016, it surged from $654 to $1,000 within seven months. In 2020, it soared from $8,570 to $18,040 in the same timeframe.
The third halving in 2020 reduced mining rewards to 6.25 Bitcoin per block, and the next halving, scheduled for April, will further reduce them to 3.125. At current prices, mining each block yields $231,250. Matthew Grieco, an analyst at digital asset investment firm Veniex International, noted that many mining companies are upgrading their equipment and increasing their mining power to remain competitive.
To maintain their profit margins, some players have relocated their operations to Central American countries where energy costs are lower, and governments are more crypto-friendly.
