Bitcoin’s Rally: A Sign of Revival in the Crypto Market?
The recent surge in Bitcoin’s price has reinvigorated the crypto market, with investors and companies alike showing renewed interest in the digital asset space. This newfound enthusiasm is evident in the improved outlook for deal flow, with Robinhood Markets Inc.’s purchase of crypto exchange Bitstamp Ltd. being a notable example.
Bitcoin’s price surge
The crypto market itself is also showing signs of revival, with the return of hallmarks of previous bull markets. Celebrities are once again promoting crypto, and new tokens are being created at an alarming rate, with over 330,000 coins debuting in the Ethereum ecosystem in April and May alone, according to crypto data tracker Dune.
“Investors often have short memories,” said Campbell Harvey, a finance professor at Duke University. “When market sentiment is high, they put extra weight on good news and tend to downplay the bad news that might have happened in the past.”
Bitcoin’s price has climbed to within 2.5% of its all-time high, with the bellwether digital currency up almost 70% this year. However, the gains pale in comparison to the returns of extremely speculative memecoins such as Dogwifhat and Bonk.
Bitcoin’s price chart
The Securities and Exchange Commission’s approval of ETFs investing directly into Bitcoin in January, followed by the agency’s step towards approving similar spot Ether ETFs in May, has contributed to the current boom. This move is seen as a significant step towards legitimizing crypto and creating new laws that would make it easier for digital-asset companies to operate.
US Bitcoin ETFs have attracted inflows for an unprecedented 18th straight day, with net subscriptions for the group of almost a dozen products standing at $15.6 billion, taking total assets to $62.3 billion, according to data compiled by Bloomberg.
Large financial companies are also wading deeper into crypto, with Mastercard resuming its partnership with Binance, the world’s biggest crypto exchange. Binance settled with the Justice Department over anti-money laundering and other violations last year and is still fighting charges from the SEC.
Crypto M&A is also heating up, with Bitcoin miner Core Scientific Inc. rejecting an unsolicited $1 billion takeover offer from artificial intelligence startup CoreWeave Inc., just days after announcing a partnership. On Thursday, Robinhood said it will acquire Bitstamp for $200 million to expand its crypto business in Europe.
“A US regulatory framework creates a velocity of innovation environment that accelerates an institution’s buy-over-build decision-making and drives a robust M&A environment,” said Elliot Chun, partner at M&A consultant Architect Partners.
Crypto funds are flourishing, with more such funds launching in the first quarter than in any time since the second quarter of 2021, according to Crypto Fund Research. Talk of new crypto IPOs is also reviving, with Kraken said to be in talks for a pre-IPO funding round, while eyeing an IPO as soon as in 2025.
“I do think that if these companies can point to explosive revenue growth or strong earnings, that will get investors’ interest,” said Matthew Kennedy, senior market researcher with Renaissance. “I suspect that the financials are there, and that investors will take them with a grain of salt — they know it’s a cyclical business, plenty of companies are like that.”
The next 18 months could see the biggest wave of crypto-related IPOs on record, according to Renaissance Capital, a pre-IPO researcher.
Crypto market growth
The crypto market’s resurgence is a sign of its resilience and ability to bounce back from past setbacks. As the industry continues to evolve and mature, it will be interesting to see how it navigates the challenges and opportunities that lie ahead.
