Bitcoin hits a 19-month peak at $41,000, What's fueling this surge?
Bitcoin has undergone a staggering surge of over 140% in the current year, eclipsing the performance of traditional stocks and gold. This bullish trend is primarily fueled by optimism within the industry, revolving around expectations of a Federal Reserve interest rate cut and the potential rise in demand from exchange-traded funds (ETFs). Surging to a 19-month high, hovering close to the $41,000 mark, Bitcoin's resurgence is linked to the anticipation of impending actions by the Federal Reserve.
The Federal Reserve's hinted interest rate cuts, coupled with prospects of heightened interest from exchange-traded funds, have revived Bitcoin from its previous high in April of the preceding year, which was prior to the TerraUSD stablecoin collapse. Industry observers are eagerly awaiting the outcome of various applications, including those from major players such as BlackRock Inc., to introduce the first US spot Bitcoin ETFs. Bloomberg Intelligence anticipates regulatory approval for several such funds by January, further raising hopes for a positive impact on the market.
Another significant factor contributing to the surge is the upcoming Bitcoin halving, scheduled for the following year. During this event, the number of tokens miners receive as rewards for their mining efforts is halved, occurring approximately every four years. This mechanism is part of the process to limit Bitcoin's total supply to 21 million tokens. Historically, Bitcoin's value has surged after each of the past three halving events, sparking optimism among investors and enthusiasts.
This remarkable momentum is supported by various tailwinds. Advocates highlight the industry's concerted efforts to curb dubious practices and the surge in ETF applications as indicators of the market's maturity and the potential for a broader investor base in digital assets. Meanwhile, growing conviction among investors that the Federal Reserve might cease hiking interest rates has ignited a global market rally.
Despite this bullish sentiment, potential disruptions loom. Alterations in rate predictions or unforeseen hurdles in the approval of ETFs could dampen Bitcoin's trajectory. Technical analysis, such as the weekly relative-strength index, suggests Bitcoin may be in an "overbought" territory, potentially signaling a correction.
Industry figures like Michael Novogratz, the CEO of Galaxy Digital Holdings Ltd., remain optimistic, forecasting Bitcoin's potential to reach its prior peak within the next year. With Bitcoin's volatility and the dynamic interplay of multiple market forces, its future trajectory remains an engaging and uncertain landscape for investors and observers alike.