Potential Bitcoin ETFs Could Drive Higher Investment in Cryptocurrency Amid Price Surge

After experiencing a decrease of over 75% in its value where one bitcoin was valued at less than $17,000 at the beginning of 2023, Bitcoin is once again in the spotlight with its price doubling this year. The world's leading cryptocurrency peaked at almost $35,000 this week, marking an 18-month high.

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The up and down saga of Bitcoin began with a startling rise at the onset of the pandemic when its cost soared from just above $5,000 to nearly $68,000 in November 2021. Its fall was spurred by a series of aggressive rate hikes by the Federal Reserve in their battle against inflation, and the subsequent collapse of one of the biggest entities in the cryptocurrency sphere, FTX.

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Contrary to expectations, the cooling down of inflation and the failure of several technology-focused banking institutions were seen as catalysts that led to more investors turning to cryptocurrencies. While traditionally investors have relied upon investing in Silicon Valley start-ups and other similar ventures, they have recently been seen switching over to cryptocurrency.

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The renewed growth of Bitcoin is being fuelled by the potential of a larger pool of investors. The concept of investing in bitcoin at spot prices instead of using futures can potentially simplify entry into the cryptocurrency market. This new way of investing could mean lower risks than previously associated with cryptocurrency investments, thus attracting more investors.

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Bitcoin exchange-traded funds (BITF) are seeing renewed interest. In simple terms, BITFs are investment funds that are traded on an exchange market, much like stocks. While federal regulators have not yet given the go-ahead to BITFs, recent victories by crypto fund managers with applications for bitcoin spot ETFs are seen as positive signs.

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The eventual launch of BITFs is being eagerly anticipated and has significantly boosted Bitcoin's prices. The Depository Trust and Clearing Corporation's recent listing of BlackRock’s iShares Bitcoin Trust have also been contributing to this trend, even though it was temporarily removed, but later reinstated.

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While this is cause for optimism, investment in cryptocurrencies including Bitcoin should still be approached cautiously, due to their nature as a highly volatile asset class. Bitcoin has seen drastic fluctuations in its value which means that the potential for loss is high, despite seeming gains.

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Even though we have witnessed an increasing number of investors returning to cryptocurrencies recently, it is not to the same extent as previously seen. The focus will be on future regulatory decisions and their impact on the cryptocurrency industry. While Bitcoin has seen a rise because of the potential for approval of spot ETF, there are still uncertainties about whether it will continue its upward trajectory moving forward.

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Overall, with the price of Bitcoin standing at $34,789 as of October 25th, it is worth keeping a close watch on this space for both seasoned and aspiring investors in the cryptocurrency market.

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