Bitcoin surpasses US$42,000 as cryptocurrency speculation intensifies

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5th December 2023 – (New York) Bitcoin, the largest digital token, continued its remarkable rally, surpassing $42,000 and extending its year-to-date gains to over 150%. The frenzied speculation in cryptocurrencies has fuelled Bitcoin’s surge, with the cryptocurrency rising as much as 6.1% to reach $42,144 by 11am on Monday in London. These levels were last seen in April 2022, before the collapse of the TerraUSD stablecoin triggered a significant downturn in the digital asset market. Bitcoin is on track to achieve its biggest annual gain since 2020.

Other cryptocurrencies, including Ether and Dogecoin, also experienced upward momentum. Bitcoin Cash saw an 11% jump, and a gauge of the top 100 crypto coins increased by more than 5%. The broad advance in the cryptocurrency market occurred even as stock markets exhibited mixed performance, with benchmarks in China and Hong Kong facing declines.

Investors are increasingly convinced that the Federal Reserve has concluded its rate hikes amidst cooling inflation, shifting focus towards potential reductions in benchmark borrowing costs next year. This change in the economic landscape has ignited a rally across global markets and reignited speculative interest in digital assets.

Analysts believe that Bitcoin’s rally is supported by optimism surrounding SEC approval for a Bitcoin exchange-traded fund (ETF) and potential Fed rate cuts in 2024. Technical chart patterns indicate that the next level to watch for Bitcoin is $42,330, according to Tony Sycamore, a market analyst at IG Australia Pty.

The crypto industry eagerly awaits the outcome of applications from firms like BlackRock Inc. to launch the first US spot Bitcoin ETFs. Bloomberg Intelligence predicts that several of these products will receive approval from the Securities & Exchange Commission by January.

Bitcoin’s resurgence from the 2022 crypto crash has endured a regulatory crackdown, resulting in the imprisonment of individuals such as Sam Bankman-Fried for fraud at FTX and the imposition of fines on Binance and its founder Changpeng Zhao. Supporters argue that these efforts to curb illicit practices, alongside the potential introduction of ETFs, signify the maturation of the crypto industry and the potential for a broader investor base.

Recent enforcement actions have instilled confidence among investors, according to Su Yen Chia, co-founder of the Asia Crypto Alliance. Bitcoin, mirroring traditional finance, is gaining momentum as expectations for Fed rate hikes fade.

However, there are lingering risks that could derail Bitcoin, including a shift in rate expectations or unexpected obstacles in the ETF approval process. Some technical indicators suggest that the virtual currency’s rally may be stretched. For instance, Bitcoin’s weekly relative-strength index (RSI) has closed above 75 for the past two weeks, indicating “overbought” conditions. Nevertheless, historical data shows that Bitcoin has historically risen an average of 15% in the subsequent month after reaching a weekly RSI of over 75.

Bitcoin’s surge in 2023 has outperformed global stocks and gold. In the derivatives market, open interest for Bitcoin futures at the CME Group and options on the cryptocurrency at the Deribit platform have reached record levels.

One factor influencing sentiment is the upcoming Bitcoin halving scheduled for next year, which will reduce the number of tokens miners receive as a reward. The halving, occurring every four years, is part of the process of capping Bitcoin supply at 21 million tokens. Previous halvings have coincided with significant price increases in Bitcoin.