Bitcoin returns to pre-crash prices

After a span of just over 18 months, Bitcoin has finally returned to its pre-crash levels before the TerraUSD stablecoin triggered the last crypto crash. The dominant cryptocurrency surged by as much as 3.6% to $36,856, reaching its highest point since May 6, 2022—the day before the TerraUSD collapse led to a series of failures across the cryptoasset space. Bitcoin’s complete recovery from this event coincided almost precisely with the one-year anniversary of the lowest point in the aftermath, marked by FTX exchange filing for bankruptcy.

Markus Thielen, head of research at Matrixport, noted that Bitcoin’s return above the level when the Terra stablecoin imploded signifies that crypto traders have moved past the psychological scars of that event. Unlike previous boom cycles, Bitcoin’s recovery this year has been characterised by intermittent surges and periods of low volatility. Overcoming the steepest monetary tightening by the Federal Reserve in four decades and navigating stringent industry regulations, Bitcoin has rebounded amid various narratives, including its role as an inflation hedge and refuge during the US banking crisis.

A potential catalyst for Bitcoin’s recent rally is the expectation of the approval of exchange-traded funds (ETFs) by the US Securities and Exchange Commission (SEC). Bloomberg Intelligence analysts suggest a theoretical window for the SEC to issue approval orders, with a 90% chance of approval by January 10. The optimism surrounding this potential approval has contributed to a more than 120% increase in Bitcoin’s value this year. Caroline Mauron, co-founder of digital-asset derivatives liquidity provider Orbit Markets, notes sustained interest in bets on a further Bitcoin rally.

Although Bitcoin is only halfway to reclaiming the heights of the 2021 crypto mania when it peaked at nearly $69,000, digital-assets advocates are already weaving narratives about its enduring strength. The anticipation of ETF approval, coupled with beliefs that the US Federal Reserve has concluded rate hikes for now and an upcoming Bitcoin halving in the next year, is fuelling the current rally, according to Josh Gilbert, a market analyst at eToro.

This milestone for Bitcoin also signifies a departure from the legacy of figures associated with its biggest failures. Sam Bankman-Fried, once hailed as a crypto saviour, recently faced a guilty verdict in one of the largest financial frauds in US history. On the other hand, Do Kwon, the creator of the ill-fated TerraUSD, has been in a Montenegrin jail and faces charges from US and South Korean authorities.