Bitcoin rose above $42,000 even as stocks and bonds took a hit

(Bloomberg) — The stock market had a rough Monday after several strong weeks. The story was similar in the bond market. Gold witnessed a radical transformation after rising to a new record level above $2,100 per ounce.

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However, in the digital asset market, Bitcoin held steady after a weekend rally that lifted the oldest token above $42,000 for the first time in 19 months, as frenzied speculation in the cryptocurrency extended its rally to over 150% this year. General.

While traders in traditional markets are rethinking aggressive pricing in of potential interest rate cuts from the Federal Reserve next year, Bitcoin-specific catalysts have helped — first and foremost, the prospects of the US Securities and Exchange Commission approving exchange-traded funds that buy the token. Featured Live – The largest and oldest cryptocurrency has broken out of the trading range it spent over the past three weeks.

Read more: What is a Bitcoin “halving”? Does it raise the price?: QuickTake

“The biggest driver behind the rise in bitcoin prices is likely the number of applications for a BTC exchange-traded fund that is expected to be approved by the SEC,” Yannis Gyoukas, senior director at Moody’s Analytics, said in an email. . “The race to launch these instruments is heating up as major asset managers prepare to snap up the underlying assets.”

Bitcoin rose as much as 6.1% to $42,144 earlier and was trading at $41,803 as of 4pm on Monday in New York. They were last at these levels in April 2022, before the collapse of the TerraUSD stablecoin accelerated the $2 trillion digital asset collapse. It’s on track for its biggest annual gain since 2020.

Smaller tokens like Ether and meme fan favorites Dogecoin have also surged. Bitcoin Cash jumped 9%, and a measure of the 100 largest cryptocurrencies added more than 4%. Cryptocurrency-related companies in the United States managed to avoid a weak day on the stock market, as stock exchange operator Coinbase Global Inc. jumped. By 5.5%, the shares of the mining company Marathon Digital Holdings Inc. rose. MicroStrategy Inc. shares rose by 8.6%. Bitcoin proxy by 6.7%.

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The cryptocurrency industry is awaiting the results of applications from companies such as BlackRock Inc. To start the first Bitcoin ETFs in the United States. Bloomberg Intelligence expects a group of these products to receive SEC approval by January.

Bitcoin’s recovery survived the 2022 crypto collapse US crackdown that put Sam Bankman Fried behind bars for FTX fraud and handed major cryptocurrency exchange Binance and its founder Changpeng Zhao rap sheets and hefty fines.

Optimists argue that the push to curb shady practices and prospective ETFs indicate the maturity of the cryptocurrency industry and the potential for a broader investor base.

Su Yin Chia, co-founder of the Asian Cryptocurrency Alliance, said the recent enforcement measures have “boosted confidence among investors.”

Unresolved risks

A reset in interest rate bets or unexpected defaults of ETFs could derail Bitcoin, while some technical indicators suggest the virtual currency’s rally has been extended.

For example, Bitcoin’s weekly Relative Strength Index, a measure of momentum, has closed above 75 over the past two weeks. Readings above 70 are seen as an indication of “overbought” conditions.

Meanwhile, in the past decade, Bitcoin has risen by 15% on average over the following month after printing a weekly RSI of over 75, according to data compiled by Bloomberg.

Bitcoin’s jump in 2023 has outpaced assets such as global stocks and gold. In the derivatives market, open interest recently advanced to historic levels on the CME pool of Bitcoin futures and on the Deribit platform for options on the most popular cryptocurrencies.

Bitcoin halving

One thing boosting sentiment is the so-called Bitcoin halving next year, which will cut in half the amount of tokens that Bitcoin miners receive as a reward for their work. The quadrennial event is part of the process of capping Bitcoin’s supply at 21 million tokens. The coin set records after each of the last three halvings.

“We could see Bitcoin price heading toward $50,000 before any major correction,” said Sissy Lou McCalman, founder of blockchain advisor Venn Link Partners. She cited the halving and the future outlook for US monetary policy among the reasons behind this.

Despite the recent rally, Bitcoin and the broader cryptocurrency market remain well below the all-time highs achieved during the pandemic-era cryptocurrency bull run. The largest token peaked at nearly $69,000 in November 2021.

–With assistance from Ana Errera.

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