Bitcoin has left China and doubters behind, pushing toward its all-time high of above $64,000 as institutional investment rises.
The cryptocurrency rose as high as $55,499 on Wednesday, a 13% up this week alone and 87% for the year. Other cryptocurrencies also jumped the train. Ether rose 2.8% to $3,575.73, maintaining the rally that started last week.
The rally has been attributed to events taking place in Washington, D.C. that have, to great extent, boosted the confidence of institutional investors to bet on cryptocurrencies.
“Regulatory uncertainty is what’s still keeping investors out of the market and every time we get a step closer to regulatory clarity, you see this kind of reaction,” Bitwise Asset Management chief investment officer Matt Hougan said. “It’s the primary driver of next great bull market in crypto.”
Volatility and regulatory concerns have held investors back from putting their money in cryptocurrency recently. In the past months, the cryptocurrency market has witnessed a wrecking plunge, triggering massive selloffs that plummeted the market’s capitalization by more than a half. But things are taking a new turn.
CNBC quoted the result of financial advisors surveyed by Bitwise, which noted that the number one thing preventing them from making allocations to crypto is regulatory uncertainty. Hougan said the majority result has been the same three years in a row.
But on Tuesday, Securities and Exchange Commission Chairman Gary Gensler said in a hearing of the House Financial Services Committee that he has no plans to ban cryptocurrency, and that a ban would be up to Congress.
That was in response to Congressman Budd’s question: “Chairman, do you support what China has done, and is the SEC planning on implementing similar bans”?
“It’s a matter of how do we get this field within the investor and consumer protection that we have, and also working with bank regulators and others,” Gensler answered, stressing the need to ensure that the Treasury Department has crypto within anti-money laundering (AML) and tax compliance.
Federal Reserve Chairman Jerome Powell has made similar comments. He said on Friday he has no plans to ban cryptocurrencies. While these statements have created uncertainties for investors, they cleared the concern that the US may tow the path of China.
“You had every major regulatory agency in the U.S. this summer declaring that they needed to create a new regulatory regime around crypto,” Hougan added. “That created a great deal of uncertainty in investors minds, they were hesitant to allocate not knowing what the range of possibilities would be. The reason we’re rallying this week is that most extreme left tail of following the path of China was wiped from the market by both Jerome Powell and Gary Gensler.”
Institutional interest has also been fingered as another reason for the recent rally. Genesis head of market insights Noelle Acheson said Wednesday’s price action is different from previous ones this year and that all signs point to it being institutionally driven.
“Institutional investors move as a herd, they are momentum chasers,” she said. “When they see this kind of momentum, they start to think, what am I going to miss? Is my performance going to be weaker than those of my competitors? Maybe I should pile into that.”
She explained that Bitcoin has maintained its rank in the top five performing digital assets over the past 24 hours. That’s something Acheson had never ever seen before, as top performers are usually smaller altcoins and DeFi assets. Bitcoin is the institutional onramp to crypto, and when it’s one of the top performers, it’s a sign the institutions are coming, Acheson said.
She added that with a sharp price jump, there tend to be several short positions that get liquidated, but that wasn’t the case Wednesday.
“At one stage that price jumped 3.5% in a five-minute window, and without the liquidations, that says that that is big spot buying,” Acheson said.
While there may have been many pointers for the rally, investors are glad that the cryptocurrency market has broken off the Chinese shackles. There is growing optimism that Bitcoin will meet the $100,000 projection before the year ends.