Bitcoin reached a 17-month high on Tuesday amid rising speculation that US regulators will approve stock market funds that invest directly in cryptocurrency.

The price increased more than 10 per cent to $34,872 a token, pulling back the losses seen in last year’s crash.

The surge was driven by hopes that the Securities and Exchange Commission would approve an exchange-traded fund (ETF), abandoning its decade-long policy of refusing to approve spot ETFs.

It followed a 10 per cent surge on Monday, when bitcoin posted its best day in nearly a year.

An approval by the US SEC of an ETF that owns bitcoin on behalf of fund investors is expected to fuel demand.

It’s argued that a spot bitcoin ETF would allow investors who have been previously wary of crypto access to the asset via the stock market, bringing a new wave of capital to the sector.

Steen Jakobsen, chief investment officer at Saxo, said: “The value of … any asset, basically, is the amount of people using it.

“So the ETF would make a large audience and increase liquidity.”

Ilan Solot, co-head of digital assets at Marex, said: “The SEC accepting a spot bitcoin ETF application would validate bitcoin as an established asset class alongside all other asset classes.

“It could close the book on rogue and unregulated institutions leading the way on crypto.

“Major institutions would now have a buy-in into the sector.”

Antoni Trenchev, co-founder of digital asset firm Nexo, said: “A sense of excitement has erupted in the crypto market and now it’s just a case of waiting to see if and when something concrete emerges from the SEC.”

The price of bitcoin, a volatile asset, dropped below $16,000 in November 2022.

It came a year after it reached a record high of $69,000.