Bitcoin breaks $45,000 for first time since April 2022
Zachary Halaschak
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Bitcoin rang in 2024 with a bang, surging to its highest level in nearly two years amid optimism about the cryptocurrency market.
On Tuesday morning, bitcoin rose to above $45,000. The increase marked a 5.8% increase from just five days ago, solid growth for the flagship digital asset, which had a strong year in 2022. The price of bitcoin is now the highest it has been since April 2022.
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The cryptocurrency has increased about 47% over the past six months alone and has posted whopping 170% returns over the last year. The rally has been fueled by investor expectations that the Federal Reserve will soon begin cutting interest rates and optimism surrounding the approval of bitcoin exchange-traded funds, among other positives for the crypto space.
Other cryptocurrencies were also up on Tuesday. Ethereum, the second largest cryptocurrency by market cap, rose as high as $2,400, its highest level since May 2022. Ethereum has had 95% returns over the past year. Ripple is also up nearly 80% the past year, and Cardano has risen by more than 110% in the past six months alone.
“With current prices now sitting above $40,000 and being almost three years removed from the last bull market, bitcoin is in a prime position to appreciate and I would imagine many institutional investors will be buying their stake in the bitcoin network relatively soon,” crypto expert and advocate Brandon Zemp said.
As interest rates rose quickly in 2022, bitcoin and other major cryptocurrencies dropped as investors, fearing a recession, left risky asset classes for safer ones. But as the Fed has driven up rates, a recession has not yet come to fruition.
Now, many economists are betting the economy could avoid a recession altogether, and that, coupled with declining inflation and the expectation of rate cuts this year, is pushing the markets up.
There is also optimism for bitcoin this year because of something known as “halving.” The bitcoin halving is an event that will take place in a few months and could be good news for bitcoin and other digital assets in the new year.
To mine for bitcoin, high-powered computers are used to verify virtual coin transactions. Bitcoin operates on what is known as a blockchain, essentially a public ledger, which contains the history of every transaction. The miners’ computers solve complicated math problems in order to add new blocks to the chain and are in turn rewarded with the digital token, making the endeavor profitable.
About every four years, the rewards for bitcoin miners get cut in half, reducing the supply of new bitcoins by 50%. That makes the product a scarcer commodity and tends to raise the price in the following months, often sparking a bull market.
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Finally, there is growing optimism about the Securities and Exchange Commission approving applications for bitcoin ETFs. The deadline for the SEC to approve them is fast approaching on Jan. 10, and those who are tracking the developments closely see the applications as likely to be approved.
Still, there are uncertainties in the coming year that could ding bitcoin and crypto markets, one of the main unknowns being future regulatory hurdles. U.S. regulators under President Joe Biden have been fairly aggressive against the crypto industry, and the SEC has filed several high-profile lawsuits against major firms.