Driven by the two factors of “possible early interest rate cut by the Federal Reserve” and “Bitcoin ETF likely to be approved in the United States,” Bitcoin has further surpassed $42,000 after breaking through the $40,000 mark. Its year-to-date increase has exceeded 150%.
According to Bitstamp’s quote, around 18:50 Beijing time, Bitcoin reached $42,000 and peaked at $42,162 per coin, hitting a new high since April 2022. Its total market value once reached $820 billion. It has now fallen back to around $41,740 with a total market value of approximately $816.4 billion.
Recently, investors are increasingly believing that as inflation cools down, the Federal Reserve will not only refrain from raising interest rates further but may even cut them “earlier” next year. The Chicago Mercantile Exchange’s “FedWatch” tool shows that the market has almost fully digested expectations of an interest rate cut starting before June 2024 by the central bank. The mainstream view also predicts that the first rate cut is most likely to occur in March next year.
This prediction not only led to a rebound in cryptocurrencies such as Bitcoin but also significant recoveries in various assets such as US stocks, US bonds, and precious metals. Among them, spot gold hit a new record high intraday with a nearly 13% increase year-to-date while the benchmark S&P 500 index accumulated over a 20% gain.
However, compared to Bitcoin’s 150% surge these gains seem slightly inferior because cryptocurrencies have another key driving factor—the highly probable approval of Bitcoin exchange-traded funds (ETFs) for listing and trading in the United States by Securities and Exchange Commission (SEC). Analysts predict that this regulatory agency will make its decision before January 10th.
Previously due to concerns about manipulation and fraudulent activities in Bitcoin trading markets SEC had been cautious about approving this transaction and had rejected related applications multiple times. However, experts predict a different outcome this time as the regulatory tone seems to be shifting.
According to reports from US media, on Thursday last week (November 30th), SEC officials met with representatives from Grayscale, BlackRock, and Nasdaq to discuss the possibility of converting Grayscale Bitcoin Trust into an ETF.
Antoni Trenchev, co-founder of virtual currency lending institution Nexo, stated that $48,000 and $52,000 seem to be the next key levels for Bitcoin. He added that the speed at which it moves towards $50,000 depends on when spot Bitcoin ETF is approved.
However, some technical indicators suggest that the upward trend in cryptocurrencies may have become excessive. For example, Bitcoin’s weekly RSI (Relative Strength Index) has remained above 75 for the past two weeks. Generally speaking, exceeding 70 is considered an overbought signal indicating that the market is in an overbought state and investors may consider selling.