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At a price not seen since April 2022, Bitcoin, the first and biggest cryptocurrency by market capitalization, surged to above $40,000 on Sunday.

The well-known cryptocurrency, which was trading over $41,500 at the time of writing, is sometimes regarded as a barometer of the general mood of the market for digital assets, with the value of other tokens rising as well, such as Ether, which crossed $2,200.

Experts identify a number of reasons for the surge, such as indications that the U.S. Securities and Exchange Commission is getting ready to approve spot Bitcoin ETFs, such as those offered by top cryptocurrency asset management Grayscale, a division of Digital Currency Group.

With regard to its application to issue a spot Bitcoin ETF, which gives investors access to a fund that gives them direct exposure to the current price of Bitcoin, Grayscale won a historic lawsuit against the SEC in August. Grayscale has met with agency representatives ever since the ruling, which the SEC declined to appeal, including last week.

The following window for SEC clearance is in early January. Giants in the TradFi sector like Fidelity and Blackrock are among the other ETF candidates.

Bitcoin crashed in 2022 with the failure of numerous well-known cryptocurrency projects, including the Do Kwon-led Terra and the Sam Bankman-led FTX, after hitting an all-time high of about $69,000 in November 2021. With concerns that other well-known cryptocurrency businesses, like as Binance, the largest exchange globally, would fail, Bitcoin began 2023 trading for less than $17,000.

Changpeng Zhao, the founder and CEO of Binance, and the Department of Justice finally came to an agreement in November following a much-anticipated legal battle. Zhao agreed to resign, and the firm agreed to pay $4.3 billion in fines. Even still, the company will be permitted to continue operations, albeit under a watchful eye from the US government, which is a result that many traders were not anticipating.

An increasing wave

Although proponents of the cryptocurrency space frequently present Bitcoin as a substitute for the established financial system, the price of the coin still reflects market trends. Another factor fueling Bitcoin's surge, according to analysts, is the possibility that the Federal Reserve would start lowering interest rates in 2024, which would encourage investors to place riskier bets.

The ascent of Bitcoin has not just boosted other cryptocurrencies. The top cryptocurrency exchange in the United States, Coinbase, has seen a 50% increase in stock price in the past month. Over $5 billion worth of Bitcoin is owned by MicroStrategy, a publicly traded software business run by Michael Saylor. The company revealed on Thursday that it has added $593.3 million more to its holdings at an average price of almost $37,000. Prominent players in the cryptocurrency space are forecasting that the rise will continue. Galaxy Digital CEO Mike Novogratz stated on Bloomberg TV last week that the U.S. approval of a spot Bitcoin ETF might bring in billions of dollars for the market. 

As bitcoin crossed $42,000 to reach a new high for the year, equities tied to cryptocurrencies that are listed in the United States jumped on Monday, hoping to build on their solid gains from November.

A combination of traders wagering on the impending approval of U.S. stock market-traded bitcoin funds and excitement about prospective interest rate cuts in the United States have propelled shares of companies whose fortunes are linked to the cryptocurrency higher in recent weeks.

At $41,649, Bitcoin surged 4.1% to reach its highest level since April 2022. It had closed the session at $42,162.

Because an approved ETF will be easier to regulate, more appealing, and simpler to invest in, it will have a significant impact on the hunger for capital, according to Ipek Ozkardeskaya, senior market analyst at Swissquote bank. 

Right now, there is a risk rally taking place, and declining yields are also greatly helping bitcoin. The fact that 2019 will be the year of halves adds to the optimistic, bullish feeling. 

The goal of halving is to gradually reduce the amount of bitcoin released, and prices have usually increased after halvings.

COIN.O, Coinbase, surged 7.5%. Even though the cryptocurrency exchange revealed a drop in third-quarter trading volumes, the stock increased by about 62% in November.

Microstrategy (MSTR.O), a bitcoin investor, gained 8.2% after purchasing $593 million worth of bitcoins last month.

Miners of Bitcoin, Riot Platforms (RIOT.O), Marathon Digital (MARA.O), and CleanSpark (CLSK.O), increased their gains to double digits in November by jumping between 10.3% and 18.8%, respectively. 

Whereas the ProShares Short Bitcoin Strategy ETF, which lets investors wager on a decline in bitcoin futures, dropped 7.7%, the ProShares Bitcoin Strategy ETF, which monitors bitcoin futures, increased 7.7% and was poised to reach a peak exceeding a year ago.

Following a series of high-profile failures in 2022 that resulted in outflows of over a trillion dollars from the sector, investor sentiment toward cryptocurrencies and similar assets had been chilly earlier this year. 

But the recent surge has sent bitcoin higher by almost 150% so far in 2023, putting it on track for its best yearly result since 2020.