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Bitcoin hits $41K amid spot ETF hopes, end of rate hikes

Bitcoin (BTC-USD) surged past $41,000 Monday morning, with some investors speculating the Federal Reserve could be done raising rates and hopes that a spot bitcoin ETF approval could cause the cryptocurrency to rise even further. Yahoo Finance's David Hollerith breaks down the rally and the outlook for the cryptocurrency.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

RACHELLE AKUFFO: Well, taking a look at Bitcoin climbing higher today, jumping above $41,000 after briefly climbing as high as $42,000 as investors speculate the likelihood of a spot ETF and bet big on the end of rate hikes. Yahoo Finance's David Hollerith is here to talk about these recent moves. So David, there is some positivity fueling the hype. But historically, how has Bitcoin performed to the closed out the year?

DAVID HOLLERITH: Yeah. Rachelle, absolutely. You know, right now Bitcoin is up about 150% year-to-date. So it's on pace to have its second best year of performance for the past six years. So if we look back at 2018, 2019, 2020, 2021, 2022, we're seeing in 2019, it was up about 90%. 2020 is obviously the biggest year on record for what we have.

And then 2022, last year was the biggest drop. And Bitcoin has had bigger drops in the past, but it kind of highlights what 2023 has been. It's been sort of an outrageous recovery of the asset despite a lot of regulatory uncertainty at least in the US.

So right now, since Bitcoin has crossed the $42,000 mark earlier this morning, it's set to basically where the price was trading before a lot of the calamity in the industry took place in the spring of last year, which led to a number of blow ups and that sort of reset and also a lot of regulatory crackdowns in the US, which sort of started the beginning of this year of how we saw the market sort of changing.

So as far as what's going on next year, I think that there's a lot of hopes about next year in terms of the macroeconomic environment and also some industry-specific things a little bit less regulatory risks in some areas that are leading traders to be a lot more optimistic about it.

AKIKO FUJITA: So David, can we talk about that optimism? I mean, there are some calls right now that are pretty bullish. $100,000 going into 2024?

DAVID HOLLERITH: Yeah. I mean, I'm not sure about the calls. But you know, I think essentially what you have is you have this Bitcoin spot ETF, which has been the story for many months. And that's become increasingly optimistic, at least from a trader standpoint. And that's because the SEC is-- we have reports that the SEC is actually engaging with some of the people who are applying to issue.

So it looks like those conversations are still happening. So that might be on the table. Then we also have this everything rally that's happening across markets where people are getting more optimistic about the Federal Reserve being finished with interest rate hikes and the cuts could even be coming next year.

And then we also have Binance recently had their settlement with the Justice Department. And that was hanging over the market as sort of one of the known last shoes to drop in the industry in terms of all the things that happened last year. FTX going bankrupt obviously being the largest sort of taking some of the risk out of the market. And so that's opening up more investors to look at crypto again and feel a little bit more comfortable with what's going on.

And then the other thing Bitcoin has a supply cut that's coming next year too. So that means that the issuance will be cut. And this has usually preceded a rally in Bitcoin for the following year. So that's another thing that Bitcoin believers are really optimistic about.

So all that to say a lot of potential tailwinds, but then also too there's a lot of court cases still going on with the SEC and other companies. Coinbase and Binance both still in the courts. And you know, neither of those cases will be finished anytime soon. So plenty of uncertainty, but it seems like a lot more optimism in the recent weeks.

AKIKO FUJITA: Uncertainty and volatility seems to be certainly the steady word there around Bitcoin. But we'll be watching. David Hollerith, thanks so much for that.