(Bloomberg) -- Bitcoin was in sight of $38,000, a level last seen in May 2022, amid an ongoing rally spurred by expectations of fresh demand for the token from exchange-traded funds.

The largest digital asset was little changed at about $37,344 as of 6:46 a.m. Thursday in New York, and has rebound about 125% from a 2022 rout. Ether jumped as much as 2% after BlackRock filed with the  SEC to list an exchange-traded fund that hold the second-largest cryptocurrency. 

While the Securities and Exchange Commission on Wednesday again deferred a decision on whether to approve the first US ETF investing directly in Bitcoin, Bloomberg Intelligence expects the green light for a batch of such funds by the middle of January. The ETFs would make it easier for institutions and mom-and-pop investors to gain exposure to the token.

Bets that the Federal Reserve is done with interest-rate hikes have also lifted crypto prices, which can be sensitive to inflections in the level of liquidity in financial markets.

Read more: Why Crypto Is Counting on Spot Bitcoin ETFs: QuickTake

“The recovery in crypto valuations can continue if real interest rates peak and we continue to see progress toward spot ETF approvals in the US market,” Zach Pandl, managing director of research at crypto fund provider Grayscale Investments LLC, wrote in a note.

One conundrum for investors is whether the climb in Bitcoin this year already discounts the likely impact of spot ETFs.

The approval may be “baked into the price” but the question is how much inflow the ETFs will attract, Sui Chung, chief executive officer of digital-asset index provider CF Benchmarks, said on Bloomberg Television. 

Diversification benefits are driving the conversation over Bitcoin investment given the token’s lack of correlation with assets like stocks over longer periods, he said.

“People haven’t given up on the ETF coming out,” said Leo Mizuhara, founder and CEO of DeFi institutional asset manager Hashnote. 

--With assistance from Muyao Shen.

©2023 Bloomberg L.P.