Bitcoin hits $US40,000 for first time since May 2022
Bitcoin topped $US40,000 as the largest digital asset extended a 2023 rebound on expectations of interest rate reductions and greater demand from the exchange-traded funds sector.
The token added as much as 2.9 per cent to reach $US40,867, taking its 2023 jump to 146 per cent. Bitcoin was last at such levels in April last year before the Terra USD stablecoin collapse that contributed to a $US2 trillion rout in digital assets.
Cryptocurrencies such as bitcoin have received a boost this week. AP
Investors are increasingly convinced that the Federal Reserve is done with rate increases as inflation cools, turning the focus to the likely extent of cuts next year. The changed backdrop has fuelled a rally across global markets.
The crypto industry is also awaiting the outcome of applications from BlackRock to start the first US spot bitcoin ETF with some of these products expected to win approval by January.
“Bitcoin continues to be supported by optimism around SEC approval for an ETF and Fed rate cuts in 2024,” wrote Tony Sycamore, a market analyst at IG. Technical chart patterns point to $US42,330 as the next level to watch for, he added.
Bitcoin’s revival from the 2022 crypto crash has weathered a US crackdown that put Sam Bankman-Fried behind bars for fraud at FTX and handed top crypto exchange Binance and its founder, Changpeng Zhao, rap sheets and big fines.
Optimists argue the drive to curb dubious practices and the prospective ETFs signal a maturing crypto industry and the potential for a wider investor base.
Recent enforcement actions “have instilled confidence among investors”, said Su Yen Chia, co-founder of the Asia Crypto Alliance. Bitcoin “is aping momentum in traditional finance with Fed rate-hike expectations fading.”
A reset in rate bets or unexpected snarls for the ETFs could yet derail bitcoin, while some technical indicators suggest the virtual currency’s rally is stretched.
For instance, bitcoin’s weekly relative-strength index, a momentum gauge, closed above 75 for the past two weeks. Readings above 70 are viewed as signalling “overbought” conditions. At the same time, bitcoin in the past decade rose an average 15 per cent over the subsequent month after printing a weekly RSI of more than 75, data shows.
In the short term, “’long trader positioning implies that further price appreciation may be harder to come by”, crypto fund provider Grayscale wrote in a note. Still, the financial and economic backdrop is set to stay positive for digital assets, it added.
Bitcoin’s jump in 2023 has outstripped global stocks and gold. In the derivatives market, open interest recently advanced to landmark levels at the CME Group for bitcoin futures and at the Deribit platform for options on the most high-profile crypto coin.
One prop for sentiment is the so-called bitcoin halving due next year, which will cut in half the amount of tokens that bitcoin miners receive as reward for their work. The quadrennial event is part of the process of capping bitcoin supply at 21 million tokens. The coin hit records after each of the last three halvings.
Bloomberg
Bloomberg
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