Bitcoin (BTC-USD) jumped above $37,000 to an 18-month high on Thursday morning, a rally fueled by greater optimism that regulators may soon approve the first exchange-traded spot fund.
As of 12:00 PM ET, it had fallen below $37,000, but was still up nearly 3% in the past 24 hours.
The world’s largest cryptocurrency has now gained more than 32% over the past month and 120% since the beginning of January.
“There is no doubt that the very positive action in bitcoin this year remains very impressive,” Matt Maley, chief market strategist at Miller Tabak + Co., wrote in a note Thursday morning.
However, that is still far from the all-time record. Bitcoin peaked at $68,789 in November 2021, but then crashed in 2022 when the Federal Reserve began raising interest rates and a number of companies imploded, including crypto exchange FTX in November 2022.
A massive crackdown on the crypto industry ensued. Regulators have sued a number of big players, including Coinbase and Binance, and last week a jury convicted FTX founder Sam Bankman-Fried of defrauding buyers, lenders and investors.
Now, investors are newly optimistic that the industry is poised for more adoption. They hope the Securities and Exchange Commission will soon give approval to a spot bitcoin ETF, which would allow investors to gain exposure to the cryptocurrency without having to own it.
black rock (BLK) is one of the well-known money managers who recently signed up to launch such a product.
Grayscale Investments wants the SEC to sign off on the conversion of its bitcoin trust into an exchange-traded spot bitcoin fund after a three-judge panel of the District of Columbia Court of Appeals ruled in its favor in August.
The panel concluded The SEC was “arbitrary and capricious” in rejecting Grayscale’s application for conversion in 2022.
Grayscale has since opened discussions with the SEC’s divisions of markets and trading and division of corporate finance, according to a person familiar with the matter.
The next official milestone when the SEC must accept or deny approval for a spot bitcoin ETF is January 10th. But the SEC could approve applications earlier.
“Any time is absolutely speculative,” this person added.
Bitcoin’s rise on Thursday also boosted shares of digital asset companies. Coinbase (COIN), the largest US crypto exchange, rose 8% while MicroStrategy (MSc) grew by 7%. Meanwhile, Marathon Digital (MARA) frozen 11%.
Crypto stocks gave back some of their gains by midday.
Bitcoin appears to be “heavily overbought,” Maley said, suggesting that a pullback could be coming soon. However, his mid-week surge did not lose the momentum of previous rises this year, he added.
“This is the kind of breakthrough that often leads to even more progress soon after,” Maley said.
To be sure, the bitcoin and crypto markets are heavily driven by derivatives trading and this can exaggerate market activity in either direction.
Over the past 24 hours, crypto trading volume has doubled to $87 billion by noon New York time. According to crypto derivatives source Coinglass, $132 million in positions of traders who were shorting bitcoin were liquidated in the same period.
The size of total short liquidations is far less than past so-called short liquidations that bitcoin has experienced this year, suggesting that more investors are buying the underlying/spot asset directly.
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto and other areas of finance.