The price of bitcoin breached the $34,000 level to hit its highest since May last year, bolstered by positive sentiment about a bitcoin exchange-traded fund.

The world’s largest cryptocurrency was trading 4.97% higher at $34,596.40 on Tuesday, according to data from Coin Metrics.

Ether, the second-biggest digital coin, surged to its highest since August, according to Coin Metrics data.

“The real catalyst that created the ‘god candle’ earlier today and pushed bitcoin above $34,000 was the $167 million in short liquidations, mainly on offshore exchanges,” said Ryan Rasmussen, analyst at Bitwise Asset Management.

“I don’t think anyone expected the level of price action we’re seeing, and those investors who were shorting bitcoin in the $33,000 plus range are certainly feeling the pain of that surprise today,” said Rasmussen.

Anticipation of a bitcoin ETF grew after the court ruled in favor of crypto-focused asset manager Grayscale over the U.S. Securities and Exchange Commission in its bid to turn its huge Grayscale Bitcoin Trust (GBTC) bitcoin fund into an ETF.

Last week, the SEC declined to appeal that ruling by a key deadline, sparking hopes a bitcoin-related ETF may be approved in the next few months.

A bitcoin ETF would give investors a way to gain exposure to bitcoin’s price movements without owning the cryptocurrency directly.

Bitcoin is considered a highly volatile asset, and its price fluctuations are unpredictable.

Major financial institutions such as BlackRock, Invesco, Fidelity and Grayscale have been pushing for bitcoin ETFs and submitted applications to sell such assets, portraying them as safer investment options compared to direct crypto investments known for their speculative nature and price volatility.

Coinbase told CNBC it is confident that a U.S. bitcoin exchange-traded fund will be approved by the U.S. SEC.

Over the past year, the sector has been embroiled in scandals and high drama such as FTX’s bankruptcy and Terraform and its CEO Do Kwon being charged in February for defrauding investors.

Bitcoin price reached an all-time high in November 2021, with values exceeding over $65,000 at that time. However, a year later, the value plummeted to around $16,000 in November last year. That was when Sam Bankman-Fried’s crypto exchange FTX collapsed and filed for bankruptcy.

The SEC has been cracking down on crypto firms, with companies such as Coinbase and Ripple embroiled in lawsuits with the SEC, which has accused them of violations in securities laws.

Both Coinbase and Ripple, as well as other crypto firms, have slammed the U.S. for a lack of clarity around crypto regulations and threatened to leave the country in response to the SEC’s crackdown.

— CNBC’s Tanaya Macheel and Ryan Browne contributed to this story.