Bitcoin, the largest cryptocurrency in the world, has experienced a significant surge in value, surpassing the $44,000 mark for the first time since April 2022. This latest rally has been fueled by a combination of declining interest rates and growing anticipation for the approval of a spot Bitcoin exchange-traded fund (ETF) in the United States.
The Rally and Market Response
The CoinDesk Bitcoin Index XBX, which aggregates pricing data from multiple exchanges, witnessed a surge from below $42,000 earlier in the day to reach a session high of $43,868. Although the price has retraced slightly to around $43,500, it remains up nearly 5% over the past 24 hours.
The volatile nature of this upward movement has resulted in the liquidation of approximately $73 million of leveraged bitcoin derivatives trading positions, primarily shorts betting on lower prices. However, this surge is supported by a confluence of factors, including increasing institutional investor interest and the expectation of regulatory approval for spot-based BTC ETFs in the U.S. This approval would simplify access to the asset for traditional players, further fueling the upward price momentum.
Technical Analysis and Price Targets
Market strategist Joel Kruger, from LMAX Group, suggests that Bitcoin’s price momentum has a clear path ahead until it reaches the area between $48,000 and $53,000, based on technical price levels. These levels correspond to the highs reached in March 2022 and September 2021, and Kruger believes that there is little resistance in this range. He explains, “There is a nice zone between those two levels with very little in the way of any meaningful resistance between the current price and that March 2022 high.
ETF Optimism and Its Impact
One of the main drivers of this recent Bitcoin rally is the optimism surrounding the potential approval of spot Bitcoin ETFs in the U.S. Several prominent investment firms, including BlackRock Inc. and Fidelity Investments, are eagerly awaiting the outcome of their applications. Analysts predict that a green light for these ETFs could come as soon as January.
However, the hype surrounding ETFs has been present since June, when asset managers first began seeking approval for these funds. Some experts question whether the surge in Bitcoin’s price is primarily influenced by expectations of Fed rate cuts next year, rather than the potential ETF listings. Tony Sycamore, a market analyst at IG Australia Pty, suggests that the ETF story may already be fully priced in. He believes that Bitcoin’s high volatility and rapid ascent serve as a reminder that the cryptocurrency is more responsive to Federal Reserve policies.