What is driving the increase in Bitcoin’s value above $41K?
Bitcoin Surges to $42K- Spurred by ETF Approval and Macro Tailwinds
Bitcoin has achieved another yearly high, reaching just over $42,000. But what has caused this surge, and is it sustainable? Here’s what you need to know.
Why Bitcoin Suddenly Catapulted to Highs
The last time Bitcoin traded above $40K was before the Terra crash. The sudden surge can be attributed to several reasons. The introduction of the spot Bitcoin ETF is the biggest narrative, with the potential to unlock as much as $70 billion in new demand for Bitcoin. Moreover, the spot Bitcoin ETF timeline indicates an approval could come between Jan 5 and Jan 10, with over 90% chance of approval as per Bloomberg senior analysts.
Bitcoin is also benefiting from macro tailwinds such as the end of the inflation top and the halt in hiking rates by the Fed. There is speculation that the Fed will decrease rates by as much as 2.75% in 2024, which is good news for crypto as lower interest rates are better for the crypto market. Additionally, the historical halving has created a supply shock that is bullish for Bitcoin, especially with increased demand from institutional investors.
$45K By New Year?
Market analysts have predicted that Bitcoin could reach $45K by the end of the year. Traders and options traders are positioned bullishly, hinting at potential short-term gains to come. The CMC Fear & Greed Index is at 75, suggesting greed but not extreme greed, which indicates there may still be room for Bitcoin to rise. Therefore, opinions are varied on how much longer the rally will last. Even Peter Schiff, known for his gold rallies, is bearish on Bitcoin’s potential for more gains.
The 2024 Outlook for Bitcoin
The expectation within the industry is that 2024 will be even more bullish than 2023. Debt burdens in several states are rising, prompting a flight into hard assets such as gold, real estate, and Bitcoin. Even in softer currencies, Bitcoin has achieved all-time highs. However, there is speculation that the approval of the spot ETF could be a ‘sell the news’ event, especially since it may take time for financial institutions to start allocating funds and the actual amounts allocated are unknown.
There is a strong consensus for Bitcoin and Ethereum to remain bullish in 2024, with BlackRock also filing for an Ethereum ETF. Overall, the outlook for Bitcoin in the near future remains optimistic, and the industry is witnessing a resurgence after a tough bear market.
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