Demand for Bitcoin has been increasing for weeks – on Tuesday the cryptocurrency broke the $50,000 mark (46,445 euros) for the first time since the end of 2021. In the morning, the price of Bitcoin climbed to $50,328, but then fell slightly again to $49,950. Observers expect a further increase.
One reason for this is that the US Securities and Exchange Commission (SEC) approved the first Bitcoin index funds on January 10th. Such exchange traded funds (ETF) track the price of the cryptocurrency. Investors can invest in Bitcoin without having to buy it directly themselves.
The prospect of a Bitcoin ETF being approved alone caused the price of the cryptocurrency to rise sharply. At the beginning of January, the currency broke the $45,000 mark, which was the highest level since April 2022. In the period since January 22nd alone, the rate has risen by 25 percent.
The upcoming “halving” of Bitcoin is also causing the price to rise: the speed at which new units are issued is reduced by halving the reward for mining Bitcoins. This happens approximately every four years and has led to strong price increases in the past. The last halving event took place in May 2020 and the next one is expected in May this year. The amount of Bitcoin is limited.
Bitcoin reached its high of almost $69,000 in 2020. A series of scandals caused the price to collapse – last year, the world’s second largest cryptocurrency platform FTX went bankrupt, and its boss Sam Bankman-Fried faces up to 110 years in prison because, according to the indictment, he embezzled customer funds. In November, the founder and former head of the world’s largest cryptocurrency platform Binance, Changpeng Zhao, was arrested in the US on money laundering charges. Zhao has already pleaded guilty.
On the occasion of the approval of the Bitcoin index funds, the head of the US Securities and Exchange Commission, Gary Gensler, warned urgently against investing in the cryptocurrency: it is “speculative and highly volatile” and has already been used for money laundering and other illegal activities. Investors should be careful – there are a “countless” number of risks. The SEC had to approve the index funds after a court ruling.
