Crypto currency Bitcoin hits five-month high above $55,000

The rally comes amid a series of developments in the US that have provided some comfort to institutional investors keen to jump into crypto currencies

Bitcoin climbed to a nearly five-month high above $55,000 on Wednesday, extending its rally from the previous day as institutions jumped in to try to catch the wave. 

The crypto currency traded 7.6% higher at $54,873.02, according to Coin Metrics. Ether also added 2.8% to $3,575.73.

Bitcoin rose $55,499 earlier in the session. It’s up 13% this week alone and 87% for the year.

The rally comes amid a series of small developments in Washington, D.C. that have provided some comfort to institutional investors keen to jump into crypto currencies.

Regulatory uncertainty is what’s still keeping investors out of the market and every time we get a step closer to regulatory clarity, you see this kind of reaction, Bitwise Asset Management chief investment officer Matt Hougan said. It’s the primary driver of next great bull market in crypto.

According to financial advisors surveyed by Bitwise, the number one thing preventing them from making allocations to crypto is regulatory uncertainty. Hougan said the majority result has been the same three years in a row.

On Tuesday, Securities and Exchange Commission (SEC) Chairman Gary Gensler said in a hearing of the House Financial Services Committee that he has no plans to ban crypto currency, and that a ban would be up to Congress.

Gensler’s comments mirror those made by Federal Reserve Chairman Jerome Powell, who also said Friday he has no plans to ban crypto currencies.

You had every major regulatory agency in the U.S. this summer declaring that they needed to create a new regulatory regime around crypto, Hougan added. That created a great deal of uncertainty in investors minds, they were hesitant to allocate not knowing what the range of possibilities would be. The reason we’re rallying this week is that most extreme left tail of following the path of China was wiped from the market by both Jerome Powell and Gary Gensler.

Genesis head of market insights Noelle Acheson said Wednesday’s price action is different from previous ones this year and that all signs point to it being institutionally driven.

Institutional investors move as a herd, they are momentum chasers, she said. When they see this kind of momentum, they start to think, what am I going to miss? Is my performance going to be weaker than those of my competitors? Maybe I should pile into that.

She noted that Bitcoin has maintained its rank in the top five performing digital assets over the past 24 hours. That’s something she had never ever seen before, as top performers are usually smaller altcoins and DeFi assets. Bitcoin is the institutional onramp to crypto, and when it’s one of the top performers, it’s a sign the institutions are coming, Acheson said.

She added that with a sharp price jump, there tend to be several short positions that get liquidated, but that wasn’t the case Wednesday.

At one stage that price jumped 3.5% in a five-minute window, and without the liquidations, that says that that is big spot buying, Acheson said.