Bitcoin surpasses $35,000 on ETF enthusiasm

Bitcoin has achieved a remarkable milestone, surging past the $35,000 mark, a level not seen since May 2022. This surge is fueled by increasing optimism surrounding the introduction of exchange-traded funds (ETFs), a development that has ignited speculation among investors.

In the world of cryptocurrency, Bitcoin is the heavyweight champion, and its meteoric rise of 11.5% to $35,000 on Tuesday is a testament to its resilience. This rally represents a remarkable 105% year-to-date recovery from the turbulent crypto landscape of 2022.

The key catalyst for this surge is the hope that the first US spot Bitcoin ETFs will gain approval in the coming weeks. Prominent asset management firms, including BlackRock Inc. and Fidelity Investments, are competing intensely to be the first to offer these investment products. Advocates of digital assets argue that the introduction of ETFs will significantly expand the adoption of Bitcoin, thus boosting its demand.

A crucial development in the ETF saga unfolded on Monday when a US federal appeals court officially recognized the victory of Grayscale Investments LLC in its quest to launch a spot Bitcoin ETF, despite objections from the US Securities and Exchange Commission (SEC). The SEC, which had been hesitant about allowing ETFs directly invested in Bitcoin due to concerns over fraud and market manipulation, is now under growing pressure to reconsider its stance, given the flurry of applications from heavyweight investment firms seeking approval for spot funds.

Last week, Bitcoin experienced a 10% intraday surge due to the ETF hype. Notably, this rally was initially triggered by an erroneous report claiming that BlackRock had received approval to launch a fund. The market quickly corrected once the mistake was identified.

The impact of Bitcoin's surge reverberated throughout the cryptocurrency market, with Ether, the second-largest digital asset, witnessing a 6% jump, surpassing the $1,800 mark. Smaller cryptocurrencies, including BNB, XRP, and the meme-fueled favorite Dogecoin, also saw substantial increases, although they moderated after the initial excitement.

The SEC has previously approved ETFs holding Bitcoin and Ether futures contracts. However, the regulatory agency has recently taken a tougher stance on cryptocurrencies in the wake of the market crash in 2022 and incidents like the bankruptcy of the FTX exchange. The approval of a spot Bitcoin ETF seems increasingly likely, and multiple funds are expected to receive the green light, although the timing remains uncertain.

Despite these positive developments, Bitcoin has not yet reached its pre-pandemic peak from 2021, when it nearly touched $69,000. Factors such as rising interest rates, which have curbed demand for high-risk assets, have held back its progress. Moreover, recent trends have shown diminishing correlations between Bitcoin and traditional assets like stocks, bonds, and gold, raising questions about the level of engagement of mainstream investors with the cryptocurrency.

In the preceding 24 hours, the cryptocurrency market bore witness to a staggering liquidation of approximately $399 million in derivatives positions, with shorts making up a substantial 75% of this considerable figure. A sweeping obliteration of $298 million in short positions unfolded, etching a significant chapter in Bitcoin (BTC) bearish sentiment. Notably, the most substantial individual liquidation recorded during this tumultuous period amounted to a noteworthy $10 million, predominantly stemming from BTC/USDT short positions on the Binance (BNB) platform, as revealed by Coinglass data.