Bitcoin prices surged to a new all-time high on Monday, crossing the $71,000 mark after the U.K.'s financial watchdog announced it would allow exchanges to list cryptocurrency-linked exchange-traded products for the first time. The move by the Financial Conduct Authority (FCA) has opened the door for increased institutional investment in the world's largest cryptocurrency, driving the current market rally.
The FCA said in a notice that it would not object to requests from recognized investment exchanges to create a U.K.-listed market segment for crypto-backed exchange-traded notes (ETNs). However, the regulator emphasized that exchanges must ensure sufficient controls are in place to maintain orderly trading and provide proper protection for professional investors. Exchanges must also meet all the requirements of the U.K.'s listings regime, issuing prospectuses and ongoing disclosures.
Following the announcement, bitcoin's price surged over 3% to hit a record high of $71,726.49 at around 4:30 a.m. ET. Ether, the second-largest cryptocurrency by market capitalization, also climbed nearly 2% to reach $4,014.90.
The London Stock Exchange acknowledged the FCA's statement, confirming that it would accept applications for the admission of bitcoin and ether ETNs from the second quarter of this year. However, the FCA clarified that only professional investors would be able to buy ETNs, as the U.K. currently prohibits retail investors from purchasing crypto-linked ETNs or derivatives due to their high-risk nature.
Sumit Gupta, co-founder of CoinDCX, attributed the current uptrend to increased institutional interest, particularly in established assets such as Bitcoin and Ethereum. "The introduction of Bitcoin exchange-traded funds (ETFs) has been a major drive, providing a secure and accessible avenue for a diverse range of investors to participate in the crypto space," he said.
Gupta also highlighted the rapid growth of BlackRock's bitcoin ETF, which has exceeded $10 billion in assets under management in a relatively short period, as evidence of growing institutional adoption and its role in driving the current market rally. Additionally, he cited the upcoming Bitcoin Halving and the anticipation around the approval of an Ethereum ETF as major factors contributing to the positive market sentiment.
Parth Chaturvedi, investments lead at CoinSwitch Ventures, expressed surprise at the speed of the current crypto market rally, noting that the price is being driven by massive institutional interest in the form of strong inflows into recently launched Spot Bitcoin ETFs in the U.S. "In just over two months of going live, Blackrock's IBIT and Fidelity's FBTC have already accumulated more than $12bn and $7.5bn in AUM," he said.
For investors, Chaturvedi advises tracking these flows as a strong indicator of future price action, as increased demand along with the upcoming reduction in supply due to the fourth halving could result in upward price movement. He also warns traders to be cautious and conduct thorough research when engaging with leverage, as liquidations could be triggered due to volatile movements, especially around the estimated halving in April.
The crypto market is already experiencing a surge in volumes, although retail participation has not yet reached the levels seen during the 2021 mania. As interest in crypto as an asset class becomes more mainstream, experts anticipate a continued focus on Ethereum, with the upcoming DenCun Upgrade and the potential approval of spot ETH ETFs by Blackrock and Fidelity further fueling the rally.
The FCA's decision to allow for crypto-linked bitcoin ETNs follows similar moves by U.S. regulators, who have recently approved the first-ever spot bitcoin exchange-traded funds from major firms such as BlackRock, Fidelity, and Grayscale. Bitcoin bulls argue that increased institutional investment will positively impact the price as more serious money floods into the market, despite the FCA's continued warnings about the high-risk and largely unregulated nature of cryptocurrencies.
