Bitcoin and other cryptocurrencies are once again making headline news as they reach new 20-month highs. These digital assets have been propelled skyward thanks to a combination of factors over the past seven weeks.
In the last 24 hours alone, the price of Bitcoin has risen by 5%, reaching nearly $43,600. Just a short while ago, it even surpassed the $44,000 mark, marking the highest price point since early April 2022. This resurgence follows a brutal bear market that cryptos experienced shortly after this time period. Since mid-October, Bitcoin has been on a red-hot streak, fueled not only by optimism surrounding the potential approval of the first spot Bitcoin exchange-traded fund (ETF) by U.S. regulators but also by other factors.
According to Zach Pandl, the managing director of research at digital asset manager Grayscale, “Both micro and macro factors are currently lining up for Bitcoin.” These factors include the Federal Reserve’s more dovish approach, tightening supply ahead of the halving, and the anticipation of a spot Bitcoin ETF approval along with a contentious presidential election in the United States next year.
In addition to hopes for a Bitcoin ETF, cryptocurrencies have also benefited from an improving macroeconomic outlook. Expectations of multiple interest rate cuts by the Federal Reserve in the coming year have created a favorable environment. While this trend has boosted both the Dow Jones Industrial Average and the S&P 500, Bitcoin has significantly outperformed the stock market. Lower interest rates and falling Treasury yields make riskier investments like Bitcoin more attractive, as higher returns can tempt investors away from safer options.
The momentum behind Bitcoin’s recent gains suggests a positive technical market outlook. Having surpassed several key levels, analysts are closely watching how Bitcoin historically moves through the zone around $40,000. If a correction does not occur, it is increasingly likely that Bitcoin could approach the $50,000 mark in the near future.
Analysis: Bitcoin’s Price Surge and Factors Driving It
Bitcoin has been experiencing a surge in prices lately, with experts noticing a trend of prices hovering between $40,000 and $46,000. According to Alex Kuptsikevich, an analyst at broker FxPro, this range has not been sustained in the past, making it crucial to look for indications of turning points around the $46,000 to $47,000 mark. This level has seen a reversal in March last year and temporary support in 2021.
An essential factor that is pushing Bitcoin prices higher is the supply and demand dynamic. This is considered the only fundamental basis for analyzing the token. Recent evidence suggests that many Bitcoin holders are unwilling to sell, leading to a tight supply situation. This situation is expected to intensify next year due to the anticipated Bitcoin “halving.” This programmed monetary policy event will decrease the issuance of the cryptocurrency.
Strahinja Savic, head of data and analytics at crypto advisor and capital markets platform FRNT Financial, highlights that there has been an increasing percentage of Bitcoin’s supply remaining unmoved for over a year. This percentage reached a record high of 70% in late November. Savic refers to the rally as the “nothing for sale rally” due to this large portion of Bitcoin investors being highly reluctant to sell.
Bitcoin’s momentum is currently its biggest tailwind, which could lead to new investments flowing into the space at a time when token supply is limited. The recent strong performance of smaller tokens like Dogecoin may indicate a broadening bullish sentiment, which would foster FOMO (fear of missing out), a driving force behind crypto bull markets in the past.
Alex Thorn, head of research at crypto financial services group Galaxy Digital, believes that many interested parties are currently on the sidelines but are likely to become involved later as the rally progresses.
In addition to Bitcoin, the second-largest cryptocurrency, Ether, has also seen a 2% increase to $2,250. Smaller tokens, including Cardano and Polygon, have also experienced positive growth with an 8% climb and a 3% rise, respectively. Memecoins, such as Dogecoin and Shiba Inu, have shown even stronger gains, with Dogecoin soaring 13% and Shiba Inu seeing a 12% increase.
Bitcoin’s recent surge in price can be attributed to various factors, including the historical price range, the supply and demand dynamic, and the momentum driving the market. As more investors take notice and new money enters the space, the cryptocurrency market is likely to witness further growth.