Within a couple of hours Wednesday, bitcoin prices skyrocketed to their highest levels in months, adding on to weeks of moderate gains amid a flurry of positive developments for the recently struggling market, with U.S. Bank and Bank of America among the latest legacy financial institutions embracing the space.
Bitcoin’s price jumped 10% to more than $55,000 by 12:30 p.m. EDT on Wednesday, reaching its highest level in nearly five months and helping its market capitalization eclipse $1 trillion for the first time since May, according to crypto-data website CoinGecko.
Though it’s still about 15% below an all-time price high in April, the world’s largest cryptocurrency far outpaced gains in the market on Wednesday, with ether, Cardano’s ada and binance coin climbing about 6%, 2% and 1% over the past 24 hours, respectively.
In a Wednesday note, Freddie Evans, a sales trader at digital asset broker GlobalBlock, attributed part of the price momentum to U.S. Bank, the nation’s fifth-largest bank by assets, announcing on Tuesday it has launched a bitcoin custody service to help investment managers store private keys for bitcoin, bitcoin cash and litecoin.
In an interview with CNBC, Gunjan Kedia, the bank’s vice chair of wealth management, said clients are “getting very serious about the potential of cryptocurrency as a diversified asset class” and also doubled down on expectations for growing institutional adoption, adding: “I don’t believe there’s a single asset manager that isn’t thinking about it right now.”
Meanwhile, Matt Senter, the chief technology officer of bitcoin shopping app Lolli, said in an email that current economic conditions—marked by rising interest rates and global market uncertainty—are also fueling bitcoin’s rise, adding the cryptocurrency (commonly viewed as a hedge against inflation) has become “increasingly resistant to turmoil in traditional markets.”
Bitcoin and the broader cryptocurrency market soared to meteoric highs during the pandemic in light of inflationary concerns and increased institutional adoption, but prices started crashing in April, when Tesla—one of bitcoin’s biggest corporate investors—disclosed it sold a large portion of its holdings and wouldn’t buy more until bitcoin mining consumed less energy. Markets have struggled to recover since then amid an intensifying regulatory crackdown in China, stemming in part from similar environmental concerns. The combined market value of the world’s cryptocurrencies—at about $2.4 trillion on Wednesday—is still roughly 10% below its peak of $2.6 trillion on May 12.
Also fueling bullish sentiment, Bank of America on Monday launched cryptocurrency research coverage, calling the nascent market “too large to ignore” in a note to clients. Though they acknowledged bitcoin’s volatility is still high, the analysts said the cryptocurrency is showing signs of maturing that should enable it to become more commonplace in investment portfolios. “Current bitcoin price dynamics appear to be driven by mainstream ownership and increased Institutional interest, which may accelerate as regulatory rules become clearer and investor protections are implemented,” the team said.