Bitcoin has recently broken through the $40,000 mark strongly, reaching a 19-month high. Various Altcoins continue to rise in turn, and market sentiment seems to have no signs of breathing a sigh of relief. This article will explore the underlying factors behind this round of upward trend and the potential for future market expectations.
Bitcoin Rose Strongly, from $30,000 to $40,000 in Just 41 Days
Bitcoin has recently embarked on an accelerated rampage, steadily rising since mid October with no intention of stopping. As of the writing date, Bitcoin has quietly reached the integer level of $40,000, with a 24-hour increase of 3.10%.
According to Gate.io’s market data, on December 4th, Bitcoin surged as high as $42,408, reaching its first high since late April 2022, with a growth rate of over 400% this year.
If Bitcoin rises to $30,000 in mid-October and now breaks through the $40,000 mark, it only takes 41 days, with an increase of over 33%.
Another indicator of market volatility highlights Bitcoin’s strength even more. ETH/BTC is the exchange rate between Ethereum and Bitcoin, which can be seen as the strong relationship between Altcoins and Bitcoin. As shown in the figure below, the exchange rate has been continuously declining since September last year, and Bitcoin has remained relatively strong.
Source: Gate.io
Although mainstream currencies such as Ethereum have also maintained a linked upward trend since the beginning of this year, overall they still remain weaker than Bitcoin, which is basically consistent with the pattern of the early bull market in the past.
We can vividly say that Bitcoin has emerged from the skyrocketing trend of Altcoins.
However, it is recalled that at the beginning of this year, the market was still a pessimistic and bleak scene, with the currency price fluctuating horizontally between $15,000 and $16,000. Some observers even shouted the argument of falling below $10,000. But as the market sentiment gradually recovers, some risks are gradually cleared, and the bear is off the bull. The Bitcoin market is back on the fast lane, and the fast pace of the crypto market is evident.
Halving Speculation and the Latest Progress in Spot ETFs May Be the Main Reasons for the Rise
We are reviewing the strong rise of Bitcoin, which is not only due to the technical rebound and repair demand but also the result of sustained improvement in fundamentals.
In general, there may be several reasons for this:
Bitcoin Halving Speculation
Looking back at past bull markets, it is not difficult to see that every time Bitcoin approaches halving, the market will hype up in advance. Currently, there are still 140 days until the fourth halving of Bitcoin, and the rewards for each block will be reduced from 6.25 BTC to 3.125 BTC.
Latest Progress in Spot ETFs
The latest progress on US spot Bitcoin ETFs has been gradually releasing a positive trend, and institutional investors are also betting on Bitcoin. Bitwise, the world’s largest virtual currency index fund management company, even optimistically stated that if the product can be approved, the overall size of spot Bitcoin ETFs can quickly reach billions of dollars.
Improvement of Macroeconomic Environment
In the second half of 2023, the global economy began to recover. According to the International Monetary Fund (IMF) forecast, the global economic growth rate will reach 2.9% in 2023, higher than 3.6% in 2022.
In addition, global inflation rates have also decreased. According to data from the US Bureau of Labor Statistics, the Consumer Price Index (CPI) in the United States increased by 6.8% year-on-year in November 2023, a decrease from 7.5% in October.
The expectation of the Fed Raising Interest Rates Has Eased Somewhat
In the second half of 2023, the expectation of the Federal Reserve raising interest rates has eased. According to CME’s FedWatch tool, the probability of the Federal Reserve maintaining interest rates unchanged in the 5.25% -5.50% range in December is 97.7%, and the probability of a 25 basis point rate hike is 2.3%. The probability of maintaining interest rates unchanged by February next year is 85.9%.
Bitcoin Ecosystem Development
The rapid development of the Bitcoin ecosystem represented by inscriptions has provided new space for the application of Bitcoin, offering new opportunities for effective use cases and speculative speculation.
How Long and How Much Can Bitcoin Continue to Rise?
Bitcoin experienced a market trend from low to volatile and then to soaring in 2023. At the beginning of the year, the price of Bitcoin hovered around $16,000, influenced by factors such as global economic recession, interest rate hikes, and FTX bankruptcy, and was once suspected of completely returning to zero. But with the gradual improvement of the global economic situation and the easing of interest rate hike expectations from major central banks such as the United States, the price of Bitcoin began to rebound in the second half of the year and broke through $40,000 in early December, refreshing market sentiment.
Overall, from a fundamental perspective, the application scenarios and ecosystem development of Bitcoin are constantly expanding, and the external liquidity environment is also improving. Driven by the increasing demand in the market and the halving of supply, the price of Bitcoin has rapidly risen and further strengthened the market’s expectation of reflexivity.
Compared to the future trend of Bitcoin, many institutions have given their own opinions. Matrixport research leader Markus Thielen predicted in a report at the end of November that Bitcoin will rise to over $60,000 by April next year and reach $125,000 by the end of 2024.
Standard Chartered Bank analyzed in a report on November 28th that Bitcoin may reach six-digit prices by the end of next year due to the possibility of the US launching spot ETFs earlier than expected.
However, in the short term, there is still uncertainty about the trend of Bitcoin.
As shown in the figure below, the weekly trend of Bitcoin is currently eight consecutive bullish days, and various technical indicators have shown a serious overbought state. The price has rebounded to the 50% resistance level of the previous bear market, and there is also a strong resistance level of 61.8% above the $48,500 line.
Source: Gate.io
Although the consensus between analysts and investors is generally bullish in the long term, short-term price fluctuations face strong uncertainty, especially for investors who have previously been cautious and hesitant. They should approach price fluctuations rationally and reduce investment errors caused by FOMO or FUD.
Studying the rise of Bitcoin requires considering many factors, which is a complex task, but it also provides useful insights for us to understand the global economic market and the improvement of social forms through the cryptocurrency economy. Indeed, it is difficult for us to grasp short-term fluctuations, but it is foreseeable that Bitcoin will undoubtedly bring about a financial transformation, reshaping the old economic ecosystem order. At this moment, let us witness this historical journey together.
