On Wednesday, Bitcoin reached its highest point in several months. The world’s largest cryptocurrency jumped to a nearly five-month high above $55,000, extending its rally from the previous day as institutions jumped in to try to catch the wave.
It traded 7.6% higher at $54,873.02 and Ether gained 2.8% to $3,575.73. Bitcoin’s price rose as high as $55,499 earlier in the session. Bitcoin is up 13% this week alone as well as 87% for the year.
The rally came amid a series of small developments in Washington D.C. Small developments provided some comfort to institutional investors keen to jump into cryptocurrencies. The biggest issue is the lack of regulations. The number one thing preventing financial advisors from making allocations to crypto is regulatory uncertainty.
This week, the Securities and Exchange Commission’s (SEC) Chairman said he has no plans to ban cryptocurrency. Gary Gensler also said in a hearing of the House Financial Services Committee that a ban would be up to Congress.
Federal Reserve’s Chairman Jerome Powell also made a similar comment several days ago. Powell said on Friday that he has no plans to ban cryptocurrencies.
This summer, every major regulatory agency in the U.S. declared that they needed to create a new regulatory regime around crypto. Their comments created a great deal of uncertainty in investors’ minds. So, they were hesitant to allocate funds not knowing what the range of possibilities would be.
Wednesday’s price action is different from previous ones in 2021. It is institutionally driven according to Noelle Acheson.
Acheson noted that the institutional investors move as a herd and they are momentum chasers. Bitcoin maintained its rank in the top five performing digital assets over the past 24 hours. That’s something Noelle Acheson had never encountered before, as top performers in most cases are smaller altcoins and DeFi assets. The major cryptocurrency is the institutional onramp to crypto. So, when Bitcoin is one of the top performers, it is a sign the institutions are coming according to Noelle Acheson who works at Genesis. Another serious signal came from the CME.
The CME had the highest basis spread – the difference between Bitcoin futures prices and the spot price – of any of the exchanges on Wednesday. Noelle Achison called it “unusual” because the CME basis normally trails that of the other exchanges.
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