Bitcoin’s price surpassed $72,000 Monday following UK’s approval of crypto-backed investment instruments. The Financial Conduct Authority’s nod to crypto asset-backed cETNs allows easier access to cryptocurrency investments, albeit with caution regarding risks. This parallels the U.S. SEC’s earlier endorsement of Bitcoin ETFs, which similarly boosted Bitcoin’s value but also highlighted the asset’s volatility.
On Monday, Bitcoin skyrocketed to an unprecedented high, soaring past $72,000, following the UK regulator’s approval for cryptocurrency-backed investment vehicles. It notably reached $72,166 during early trading, marking a significant rise just after it had overcome a previous record of nearly $69,000 from November 2021. Notably, the recent price upswing came after a brief dip of 10% from the previous high before recovering its momentum.
The UK’s Financial Conduct Authority (FCA) announced it will “not object” to the establishment of a U.K. market segment dedicated to cryptocurrency asset-backed Exchange Traded Notes (cETNs). These innovative financial products allow traders to invest in assets that correlate with the fluctuating prices of cryptocurrencies, eliminating the need to navigate the complexities of buying actual coins.
While endorsing cETNs, the FCA emphasized that these investment products will not be available to retail investors, highlighting the risks linked with cryptocurrency investments. “The FCA continues to remind people that cryptoassets are high risk and largely unregulated. Those who invest should be prepared to lose all their money,” the regulatory body stated, reaffirming the need for caution.
This regulatory move mirrors a similar decision by the U.S. Securities and Exchange Commission (SEC) in January, which also approved Bitcoin Exchange-Traded Funds (ETFs). Such ETFs allow investors to engage with Bitcoin’s price movements without directly investing in the cryptocurrency, which previously led to a spike in Bitcoin’s market value due to fresh inflows of capital.
Following the SEC’s green light for Bitcoin ETFs, numerous such funds became available, attracting significant investments from well-established financial companies. According to Bryan Armour from Morningstar, the nine leading Bitcoin ETFs amassed around $10 billion in the first seven weeks post-approval, significantly increasing Bitcoin’s worth by 54% since January 10.
Nevertheless, Bitcoin’s trajectory remains fraught with volatility. In past scenarios, the cryptocurrency has experienced sharp declines, including a 15% drop shortly after the ETF approval before recovering. Over the previous five years, there have been four instances where Bitcoin plummeted over 40%. In essence, ETFs serve as investment vehicles that allow speculation on asset price increases without the need to actually acquire the underlying asset, like gold or Bitcoin, simplifying the investment experience.
The recent surge of Bitcoin to over $72,000 following the UK’s FCA’s approval of crypto-backed investment vehicles showcases a pivotal moment in cryptocurrency investment. While regulatory endorsements like these pave the way for mainstream acceptance, caution remains vital due to the inherent risks tied to cryptocurrency. The global pattern of ETF approvals continues to reshape investment landscapes, inviting both opportunities and volatility in equal measure.
Original Source: abcnews.go.com
