Bitcoin Surge Reignites Interest in Cryptocurrency Market
Bitcoin's near-record surge sparks renewed interest in crypto, boosting investments, M&A activities, and potential IPOs, while investors forget past losses.
Bitcoin's recent climb to near-record highs has sparked renewed interest, not only within the cryptocurrency market but also across the broader financial sector. This shift in sentiment is evident from increased deal activity, including Robinhood Markets Inc.'s acquisition of the crypto exchange Bitstamp Ltd., a resurgence in venture-capital investments, and expectations of a record number of initial public offerings (IPOs) from companies connected to the crypto industry.
In the crypto market, signs of past bull runs are re-emerging. Celebrities are once again endorsing cryptocurrencies, and new tokens are being created at a rapid pace. In April and May alone, about 330,000 coins were introduced in the Ethereum ecosystem, according to data tracker Dune.
The rising prices have encouraged investors to overlook previous financial setbacks, such as the bankruptcies of crypto exchange FTX and lender Celsius, in a market known for its cycles of booms and busts.
"Investors often have short memories," said Campbell Harvey, a finance professor at Duke University. "When market sentiment is high, they focus more on positive news and tend to disregard past negative events."
This week, Bitcoin surged to within 2.5% of its all-time high of $73,798, driven by strong demand for recently approved exchange-traded funds (ETFs). While Bitcoin has increased by nearly 70% this year, the gains are modest compared to the returns of highly speculative memecoins like Dogwifhat and Bonk.
The current boom began when the Securities and Exchange Commission (SEC) approved ETFs that invest directly in Bitcoin in January. In May, the SEC moved closer to approving similar spot Ether ETFs, responding to increased political pressure to legitimize crypto and establish regulations that facilitate the operation of digital-asset companies.
US Bitcoin ETFs have seen inflows for 18 consecutive days, with net subscriptions totaling $15.6 billion and total assets reaching $62.3 billion.
Large financial institutions are also deepening their involvement in crypto. Mastercard recently resumed allowing Binance users to make purchases on its network. Binance had previously settled with the Justice Department over anti-money laundering violations and is currently addressing charges from the SEC.
"Over the past several months, we have reviewed the enhanced controls and processes that Binance has implemented," a Mastercard spokesperson stated. "Based on these efforts, we have decided to allow Binance-related purchases on our network, contingent on ongoing reviews."
The crypto mergers and acquisitions (M&A) landscape is heating up. Bitcoin miner Core Scientific Inc. recently rejected a $1 billion takeover offer from AI startup CoreWeave Inc., shortly after announcing a partnership. Additionally, Robinhood announced a $200 million acquisition of Bitstamp to expand its crypto operations in Europe.
"A US regulatory framework fosters a velocity of innovation that accelerates institutional buy-over-build decisions and drives a robust M&A environment," said Elliot Chun, partner at M&A consultant Architect Partners. "In May 2024, our industry officially transitioned from #TheGreatPurge to #TheGreatSurge."
Crypto funds are flourishing, with more funds launching in the first quarter than at any time since the second quarter of 2021, according to Crypto Fund Research.
Discussions about new crypto IPOs are gaining momentum. Kraken is reportedly in talks for a pre-IPO funding round, aiming for an IPO as early as 2025. If crypto prices continue to rise, the next 18 months could see the largest wave of crypto-related IPOs on record, according to Renaissance Capital.
"I believe that if these companies can demonstrate explosive revenue growth or strong earnings, they will attract investors' interest," said Matthew Kennedy, senior market researcher with Renaissance. "Investors understand that it's a cyclical business and will consider the financials with that perspective."
