Why is Bitcoin up ~60% over the last two months? And where does this rally end?
Bitcoin has put in another yearly high today and briefly crossed $42,000.
Why is Bitcoin up ~60% over the last two months? And where does this rally end?
Here’s all you need to know…
Why Bitcoin Suddenly Catapulted to Highs
The last time Bitcoin traded above $40K was before the Terra crash.
And there are several reasons for this sudden price explosion!
The biggest narrative is surely the spot Bitcoin ETF, which could unlock as much as $70B in new demand for Bitcoin.
The spot Bitcoin ETF timeline indicates an approval could come between Jan 5 and Jan 10. Bloomberg senior analysts are putting the chances of approval at over 90%.
But Bitcoin is also benefiting from macro tailwinds. The inflation top seems to be in and the Fed has stopped hiking rates. In fact, the consensus opinion is that the Fed will cut rates in 2024 – and it could be as much as a 2.75% decrease over the year, according to UBS. Interest rates have a strong effect on crypto markets. The lower the interest rate, the better for crypto.
And then there is the halving. This supply shock has traditionally been bullish for Bitcoin. With more demand from institutional investors and less supply thanks to the halving, the chances of a 2024 bull run look great.
But how long will this rally last?
$45K By New Year?
Markus Thielen, research head at crypto services provider Matrixport and founder of analytics portal DeFi Research, told CoinDesk that Bitcoin could reach $45K by the end of the year. Options traders are positioned bullishly and futures markets have opened new premiums, which hints at potential short-term gains to come.
Traders on Crypto Twitter are also mostly bullish. $46K seems to be in play, according to Bluntz Capital:
Peter Schiff, who enjoyed a gold rally along with the Bitcoin rally is (of course) bearish. Another potential indicator for more gains?
The CMC Fear & Greed Index is at 75, indicating greed but not extreme greed just yet. There seems to be still a bit more room to run for Bitcoin:
But what happens next if the spot ETF gets approved?
The 2024 Outlook for Bitcoin
The consensus in the industry is that 2024 will be even more bullish than 2023.
Debt burdens in several states are rising, which is prompting a flight into hard assets: gold, real estate and Bitcoin. In fact, Bitcoin already put in all-time highs in softer currencies like the Argentine Peso or the Turkish Lira. Talks of the Supercycle are back on the table on Crypto Twitter:
But could the spot ETF approval (if it is approved) be a ‘sell the news’ event?
It could, says venture capitalist Chris Burniske:
For starters, a spot ETF approval would not mean BlackRock and friends start buying Bitcoin right away. It would take some time to get the financial plumbing done for the funds to start allocating.
Furthermore, we don’t know how much BlackRock and other ETF issuers will allocate. It will be a sizeable position but just how much is guesswork on part of analysts. Once euphoria from the ETF subsides, market participants may find that allocations could take longer and be smaller than expected.
Either way, Bitcoin and Ethereum look firmly bullish for 2024. Remember, BlackRock filed for an Ethereum ETF as well. Congrats to everybody who survived the bear market.
We are so back!
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