Bitcoin surpassed $40,000, extending the largest digital asset's 2023 rally in anticipation of interest-rate cuts and increased demand from the exchange-traded funds industry. The token increased by as much as 2.9 percent to $40,867 as of 10:33 a.m. Monday in Singapore, bringing its 2023 increase to 146%. Bitcoin last reached such levels in April 2022, just before the TerraUSD stablecoin collapse, which contributed to a $2 trillion drop in digital assets.
Investors are increasingly confident that the Federal Reserve is done raising interest rates as inflation falls, focusing on the expected magnitude of cuts next year. The new environment has sparked a rise in global markets.
The crypto business is also awaiting the decision of applications from firms such as BlackRock Inc. to launch the first Bitcoin ETFs in the United States. Bloomberg Intelligence anticipates that a batch of these products will be approved by the Securities and Exchange Commission by January.
Managing the Crackdown
"Bitcoin continues to be supported by optimism around SEC approval for an ETF and Fed rate cuts in 2024," stated Tony Sycamore, a market analyst at IG Australia Pty, in a report. According to technical chart trends, the next level to watch for is $42,330.
Bitcoin's recovery from the 2022 crypto crisis has been hampered by a US crackdown that landed Sam Bankman-Fried in prison for FTX fraud and landed leading crypto exchange Binance and its CEO Changpeng Zhao with rap sheets and large fines.
Optimists claim that the drive to curtail questionable practices, as well as the possible ETFs, signify a growing crypto market and the potential for a larger investor base. Recent enforcement measures "have instilled confidence among investors," according to Su Yen Chia, co-founder of Asia Crypto Alliance. The digital currency bitcoin "is aping momentum in traditional finance with Fed rate-hike expectations fading," she went on to say.
Persistence of Risks
A resetting of rate bets or unanticipated snarls for ETFs could yet crash Bitcoin, while certain technical indicators indicate the virtual currency's run is over. For example, Bitcoin's weekly relative-strength index, which serves as a momentum gauge, has closed over 75 for the past two weeks. Readings above 70 are considered to indicate "overbought" situations. At the same time, according to Bloomberg statistics, Bitcoin has risen an average of 15% in the following month after printing a weekly RSI of more than 75 in the previous decade.
In the immediate term, "'long' trader positioning implies that further price appreciation may be more difficult to come by," stated Grayscale Investments LLC's research team in a December 1 note. Nonetheless, the financial and economic background is expected to remain favorable for digital assets, according to the experts.
Bitcoin's rise in 2023 has outpaced that of world stocks and gold. In the derivatives market, open interest in Bitcoin futures and options on the most prominent cryptocurrency recently reached historic highs at the CME Group and the Deribit platform, respectively.
Bitcoin is Being Halved
One source of optimism is the upcoming Bitcoin halving, which will decrease in half the quantity of tokens that Bitcoin miners receive as a reward for their efforts. The quadrennial event is part of the process of limiting the quantity of Bitcoin to 21 million coins. After each of the last three halvings, the coin broke records.
Bitcoin and smaller tokens like Ether and BNB remain well below their all-time highs set during the pandemic-era crypto bull run. In November 2021, the largest token reached about $69,000.
The rise in digital-asset prices at the start of the week spread to Asian crypto-linked stocks. Monex Group of Japan and Woori Technology Investment Co. of South Korea were among the winners.
In the United States, digital-asset exchange Coinbase Global Inc. and software business MicroStrategy Inc. - the largest publicly traded corporate Bitcoin holder - are both up more than 270 percent year to date. MicroStrategy purchased $593 million more of the cryptocurrency last month, bringing its total holdings to almost $6.5 billion.
