Bitcoin soars past $55,000 on George Soros fund endorsement

Bitcoin is back, and it has a prominent new supporter.

Bitcoin surged on Wednesday to its highest level in five months, as market sentiment continued to improve due in part to news a hedge fund controlled by billionaire investor George Soros trades bitcoin.

The price of the world's most valuable cryptocurrency spiked nearly 10% Wednesday morning to around $55,000, following news that the investment firm founded by billionaire George Soros owns bitcoin.

Investors also expect a seasonal rally in cryptocurrencies this quarter.

Bitcoin rose 0.43% to $55226.9 by 11:50(GMT+8).

Soros, who is famous for making big money on traditional currency investments, is rumored to have been trading in bitcoin for the past few months.

The bitcoin surge comes one day after prices popped above $50,000 for the first time in four weeks.

And the head of Soros Fund Management argues bitcoin has even more long-term potential: "I'm not sure bitcoin is viewed only as an inflation hedge here. It's crossed the chasm to mainstream," said Dawn Fitzpatrick, CEO and chief investment officer of Soros Fund Management, in an interview at the Bloomberg Invest Global Summit late Tuesday.

Fitzpatrick told Bloomberg that Soros Fund Management owns "some coins...but not a lot.”

There are seasonal factors as well.

"Bitcoin performs historically well in October, which almost makes the rising ... price now a self-fulfilling prophecy. I've been saying repeatedly since the summer that I expect a new all-time high in October," said Ruud Feltkamp, CEO of cloud-based automated crypto trading bot Cryptohopper.

"So what is the reason for this new pump? I think it's partly due to the market cycle we're in, where the emotional part plays a significant role."

U.S. Bancorp (USB.N) announced it launched a cryptocurrency custody service for institutional investment managers who have private funds in the United States and Cayman Islands.

Smaller coins, which typically moves in line with bitcoin, were also up. Ether rose 2.2% to $3,594 and XRP was slightly up 0.2% at $1.0865.

Ben McMillan, chief investment officer at IDX Digital Assets, a factor-based crypto index strategy, noted that based on an analysis of on-chain data, he is seeing a steady rise in the number of new bitcoin addresses, after a huge drop-off in the first half of the year, as well as an increasing number of bitcoin moving off exchange.

Both factors - new addresses and bitcoin moving away from exchanges - are "structurally bullish indications."

That said, McMillan said while the structural bull case for bitcoin is strong, "there remain non-trivial downside risks in the near term."

Bitcoin and other cryptos have rallied sharply this year, despite concerns about a crackdown in China and the possibility of tougher regulations in the United States. That's thanks to factors like rising interest rates and the fact that more big financial firms are investing in digital currencies.

The value of all bitcoins in circulation is now back above $1 trillion — more than the market value of Facebook (FB). And all cryptocurrencies together represent $2.3 trillion in circulation, matching the market value of the most highly valued stock: Apple (AAPL).

El Salvador recently became the first nation to adopt bitcoin as legal tender. Bitcoin fans argue that the cryptocurrency should see near term benefits from inflation pressures and higher bond yields, as government-backed paper currencies like the dollar, euro and yen lose some of their purchasing power as rates rise.

Still, several prominent business leaders and investors have expressed reluctance to embrace bitcoin and other cryptocurrencies. Mega-billionaire Warren Buffett continues to criticize bitcoin. And so did JPMorgan Chase (JPM) CEO Jamie Dimon in a recent appearance on the Axios HBO TV show.

But the fact that the Soros family office, which manages money for the billionaire philanthropist, now publicly has some skin in the crypto game adds to the legitimacy of the sector.

Crypto bulls also cheered after US Bancorp (USB) announced plans this week to offer more cryptocurrency custody services for large institutional investors that want to trade bitcoin.

"Investor interest in cryptocurrency and demand from our fund services clients have grown strongly over the last few years," said Gunjan Kedia, vice chair of U.S. Bank Wealth Management and Investment Services in a news release. "Our fund and institutional custody clients have accelerated their plans to offer cryptocurrency."