Bitcoin surpasses $50,000 for the first time since 2021, signaling massive recovery

O Bitcoin It surpassed the $50,000 threshold for the first time in more than two years on Monday — the latest sign of a massive recovery for the scandal-hit crypto sector.

The pricey cryptocurrency rose nearly 5% in afternoon trading on Monday and hovered around the $50,000 mark. Bitcoin is up more than 16% since the beginning of the year.

+ Cryptocurrencies: bitcoin rises by more than 6%, with movements in crypto ETFs on the radar

Crypto fanatics have been encouraged by expectations that the Federal Reserve will soon ease market conditions by cutting interest rates. The market projects that the Fed's first rate cut in years could come as early as May.

The SEC's approval last month of spot bitcoin ETFs — which allow investors to purchase stakes in funds that hold bitcoin — also appears to be fueling renewed optimism among investors.

Proponents say ETFs will increase demand by making it easier for everyday investors to access the crypto market. Bitcoin briefly fell after approval, but trading has been robust since then.

“I think the approval of spot ETFs was a 'buy the rumor, sell the news' event, and after some profit taking, everyone in the market is pulling in the same direction,” said Christopher Alexander, director of analysis at Pioneer. Development Group.

Another key factor is the imminent bitcoin “halving,” a pre-planned event that occurs once every four years and halves the amount of digital currency people receive for “mining.” Historically, bitcoin prices have risen after the halving – and the next one is expected to happen in mid-April.

“This has always occurred around a bull run, and while it may not be the direct cause of a rise in the price of BTC, it is definitely a psychological event that has some impact on the market,” Alexander added.

Bitcoin experienced a huge crash shortly after reaching its all-time high price of $69,000 in November 2021. The leading crypto token has not traded above $50,000 since December of that year.

The industry was rocked by a so-called “crypto winter” in 2022, with bitcoin falling a staggering 64% as rising interest rates led some investors to dump their crypto holdings in favor of less risky options.

The problem has been compounded by stunning implosions of the TerraUSD stablecoin and its interlinked sister cryptocurrency, Luna.

The most significant scam occurred in November 2022, with the collapse of convicted fraudster Sam Bankman-Fried's FTX empire. Bankman-Fried is awaiting sentencing after being convicted late last year of stealing $10 billion from his clients.

Traders have regained their appetite for risky assets despite warnings from SEC Chairman Gary Gensler, who has remained critical of cryptocurrencies as an investment vehicle despite his agency's approval of spot ETFs.

“Investors should be aware that the underlying asset is a highly speculative and volatile asset,” Gensler told CNBC last month. “Among its use cases is really for illicit activities – money laundering and sanctions and ransomware and the like.”

Bitcoin “halves” aim to ensure the currency’s scarcity over time. Although the events are often compared to corporate stock splits, existing bitcoin stocks are not affected other than by the resulting price changes.

While the exact impact of each halving on the value of bitcoin is a matter of debate, the last halving in 2020 came about a year and a half before a sustained recovery that saw the price rise to its all-time high.

Bitcoin rose nearly 1,000% in the 12 months after the 2016 halving and about 8,000% in the year after the 2012 halving, according to Bloomberg.