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By Tom Wilson and Tom Westbrook
LONDON/SINGAPORE (Reuters) - Bitcoin rose on Monday, briefly surpassing $42,000 for the first time since April 2022, in a new surge of momentum fueled by the possibility of U.S. interest rate cuts and traders betting that the U.S. will soon approve exchange-traded bitcoin funds.
The world's biggest cryptocurrency hit as high as $42,162 on Monday, its highest since April 2022, seemingly casting off the funk that had settled over crypto markets following the collapse of FTX and other crypto-business failures last year.
At 1256 GMT, it was at $41,754, up 4.4% on the day.
Its 50% rally since mid-October has "seemed to mark a decisive shift away from the bearishness of 2022 and early 2023," said Justin d'Anethan - head of business development for Asia-Pacific at Keyrock, a digital assets market making firm.
D'Anethen said evidence of institutional buying through November showed a new leg of interest and that although reversals ahead were not inconceivable, lows hit around $16,000 a year ago "probably marked the bottom".
Bitcoin is up by over 150% so far this year.
Bitcoin-investor Microstrategy last week disclosed it bought an additional $593 million in bitcoin during November.
Meanwhile, riskier investments and other interest-rate sensitive assets, such as gold, have also rallied hard over the last few weeks as markets wager that the U.S. Federal Reserve has finished hiking rates and will start cutting early in 2024.
Reports in October that the U.S. Securities and Exchange Commission won't appeal a court ruling that found the agency had been wrong to reject an exchange-traded fund application have also driven bets that an eventual approval is near.
A spot bitcoin ETF could allow previously wary investors access to crypto via the stock market, ushering a new wave of capital into the sector.
Geoff Kendrick, head of digital assets research at Standard Chartered, said bitcoin's recent gains were "mostly due to expectations of spot ETFs coming to fruition" in the U.S., which he expects to happen in the first quarter of 2024.
Lower Treasury yields are also helping, Kendrick said, as bitcoin is "the ultimate long duration assets."
Investors have welcomed the settlement of a years-long U.S. criminal probe into Binance, the world's largest crypto exchange and a key cog in the worldwide crypto market. The deal, which saw Binance founder Changpeng Zhao step down after pleading guilty to breaking U.S. anti-money laundering laws, allows the company to continue operating.
Ether, the coin linked to the Ethereum blockchain network, also rose on Monday, hitting $2,274.
Both bitcoin and ether remain far below their record highs, hit in 2021, of $69,000 and $4,868 respectively.
(Reporting by Tom Wilson and Elizabeth Howcroft in London, Nilutpal Timsina in Bengaluru and Tom Westbrook in Singapore; Additional reporting by Brigid Riley in Tokyo; Editing by Chizu Nomiyama, Sonali Paul, Sam Holmes, Emelia Sithole-Matarise and Bernadette Baum)
