(Bloomberg) — The stock market had a difficult Monday after several weeks of strength. It was a similar story on the bond market. And gold made a U-turn after climbing to a new record above $2,100 an ounce.
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But in the digital asset market, Bitcoin held its own after a weekend rally that saw the oldest token break above $42,000 for the first time in 19 months, as frantic speculation in cryptocurrencies extended its rally to over 150% this year .
As traders in traditional markets reconsider the aggressive pricing of potential Federal Reserve interest rate cuts next year, Bitcoin-specific catalysts — most notably the prospects for the U.S. Securities and Exchange Commission to approve exchange-traded funds that buy the token directly — have helped the biggest and oldest Cryptocurrency broke out of the trading range of the last three weeks.
Read more: What is Bitcoin “Halving”? Does it increase the price?: QuickTake
“The biggest driver of the Bitcoin price increase is likely the number of applications for spot BTC ETFs that are expected to be approved by the SEC,” Yiannis Giokas, senior director at Moody’s Analytics, said in an email. “The race to launch these vehicles is increasing and major asset managers are preparing to acquire the underlying asset.”
Bitcoin rose as much as 6.1% to $42,144 and was trading at $41,803 as of 4 p.m. in New York on Monday. The token was last at this level in April 2022, before the collapse of the TerraUSD stablecoin, which accelerated a $2 trillion decline in digital assets. It’s on track for its biggest annual gain since 2020.
Smaller tokens such as Ether and the popular meme coin Dogecoin also rose. Bitcoin Cash rose 9% and a measure of the 100 largest crypto coins gained more than 4%. Cryptocurrency-related companies in the U.S. escaped an otherwise weak day on the stock market, with exchange operator Coinbase Global Inc. up 5.5%, miner Marathon Digital Holdings Inc. up 8.6% and Bitcoin proxy MicroStrategy Inc. by 6.7%.
The story goes on
The crypto industry is awaiting the results of applications from companies like BlackRock Inc. to launch the first spot Bitcoin ETFs in the United States. Bloomberg Intelligence expects a number of these products to receive approval from the Securities & Exchange Commission by January.
Bitcoin’s revival after the 2022 crypto crash has weathered a US crackdown that put Sam Bankman-Fried behind bars for fraud at FTX and gave leading crypto exchange Binance and its founder Changpeng Zhao criminal records and hefty fines.
Optimists argue that the push to curb dubious practices and the future ETFs point to a mature crypto industry and the potential for a broader investor base.
The recent enforcement actions “have instilled investor confidence,” said Su Yen Chia, co-founder of the Asia Crypto Alliance.
Ongoing risks
A rebalancing of interest rate bets or unexpected problems in ETFs could still derail Bitcoin, while some technical indicators suggest the virtual currency’s rally is continuing.
For example, Bitcoin’s Weekly Relative Strength Index, a momentum indicator, closed above 75 for the past two weeks. Values above 70 are considered a signal of “overbought” conditions.
At the same time, over the past decade, Bitcoin rose an average of 15% over the following month after recording a weekly RSI of more than 75, according to data compiled by Bloomberg.
Bitcoin’s 2023 surge has outperformed assets such as global stocks and gold. In the derivatives market, open interest recently rose to groundbreaking levels on the CME Group for Bitcoin futures and on the Deribit platform for options on the best-known crypto coin.
Bitcoin halving
A boost to sentiment is the so-called Bitcoin halving coming next year, which will halve the amount of tokens that Bitcoin miners receive as a reward for their work. The event, which takes place every four years, is part of the process of capping the Bitcoin supply at 21 million tokens. The coin hit records after each of the last three halvings.
“We could see Bitcoin rallying toward $50,000 before a major correction,” said Cici Lu McCalman, founder of blockchain advisor Venn Link Partners. She cited the halving and the outlook for US monetary policy as reasons for this.
Despite the recent surge, Bitcoin and the broader crypto market are still well below the all-time highs reached during the pandemic-era crypto bull run. The largest token peaked at nearly $69,000 in November 2021.
– With support from Anna Irrera.
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