The end of the FTX crisis; Is Bitcoin Poised for a Continued Ascent?

The price of Bitcoin fell to $15,625 in November last year, some time after the bankruptcy of the FTX exchange. Now that the trial of Sam Benkman Farid, the founder of this exchange, has ended and he could be sentenced to more than 100 years in prison, we see that this digital currency has once again returned to the $35,000 range. But could the increased likelihood of ETF approvals, an improving US economy and the upcoming halving set Bitcoin up for a sustained rally?

To Report CoinDesk, the deep and dark winter of the digital currency market began with the collapse of the FTX exchange last November, with the possible loss of billions of dollars of customer capital and a crackdown on the industry by regulators. A year after the incident, 90% of the client funds were returned to them by the sale of FTX assets.

Increasing usability and ETFs drive Bitcoin price growth

It didn’t take long for Bitcoin to overcome widespread fear in the cryptocurrency market and return to where it was before the crash. This digital currency was able to compensate for all the price reduction caused by the fall of FTX on January 18 (December 28).

Macroeconomic conditions certainly played a role in accelerating Bitcoin’s price recovery, but the growing trend of blockchain-based application development cannot be ignored. Jason Fang, one of the directors of Sora Ventures, said:

Speculative trading alone will not make the price of Bitcoin reach $200,000 or $400,000, but the growth will occur because they see the value of Bitcoin in its utility.

Fang, whose company invests in the development of Bitcoin-based applications, believes that the future rise in the price of this digital currency will be primarily due to its technology. He noted that decentralization is part of Bitcoin’s advantages.

As long as Ethereum or other prominent layer 2 solutions like Solana rely on cloud service providers like Amazon Web Services, it’s questionable how decentralized they can be. Fang also points out that Ethereum and other projects rely on their foundations to develop their technology, which would be a big challenge if something goes wrong.

He added:

These projects are focused on their technology and funding, so if either of these things go wrong, they’re in trouble. But Bitcoin is funded by miners, who are rewarded to support the network. This mechanism leads to a more profitable business for them. Bitcoin’s path is unique and does not require compatibility with Ethereum, which makes its narrative even more powerful.

Of course, it cannot be said that Ethereum or Solana have performed badly over the past year.

Ethereum price has increased by 17% and Solana price by 26% compared to last year. Although Bitcoin has seen a 70% growth in its value. Lucy Hu, senior analyst at Metalpha, attributes this to the market’s anticipation of spot ETFs’ application approval and the Federal Reserve changing course.

He explained:

The price of Bitcoin, in the short and medium term, will be determined by the approval of ETFs, possible interest rate cuts by the Federal Reserve, increasing bullish sentiments of institutional investors such as MicroStrategy, as well as the halving event in the first half of next year.

Currently, the market expects spot bitcoin ETFs to be approved in the US market, possibly in January 2024, and a number of big names, including BlackRock and Fidelity, are gearing up for that.

High volume of market transactions at the end of the year

An ETF that appears to be months away from approval and a resurgence of financial institutions’ interest in digital currencies have caught the attention of traders.

Trading volume in the digital currency market was low for most of the year, and Coinbase showed this by releasing its earnings report for the year. In such a way that the volume of activity in the spot markets of digital currencies reached its lowest level in the last 4.5 years in September.

But then, in late October, we saw trading volume pick up as the odds of ETF approval increased and the market thawed. According to the Coinshare report, digital currency investment funds registered the largest volume of weekly capital inflows in the last 15 months with 326 million dollars by the end of October (November 8).

Fang said:

Bitcoin proved its resilience especially after the collapse of the FTX exchange, its price did not go to zero and showed that blockchain is not for scams. Bitcoin is here to stay. In contrast, many of the top 20 tokens are still in the early stages of their growth and haven’t experienced a real bear market. However, Bitcoin is expected to survive multiple downturns and last for the long term.