Bitcoin Surges Past $40,000 on Rate Cut Expectations and ETF Hopes
Bitcoin, the largest digital asset, continued its 2023 rebound and surged past $40,000, driven by expectations of interest-rate cuts and increased demand from the exchange-traded funds sector. The token added as much as 2.9% to reach $40,867, marking a 146% jump since the beginning of the year.
Anticipation of Rate Reductions
Investors are becoming increasingly convinced that the Federal Reserve is finished with rate hikes as inflation cools. As a result, the focus has shifted to the likely extent of cuts in the upcoming year. This changed backdrop has fueled a rally across global markets, possibly contributing to Bitcoin’s resurgence.
Expectations for ETF Approval
The crypto industry is eagerly awaiting the outcome of applications from companies like BlackRock Inc. to launch the first US spot Bitcoin ETFs. Bloomberg Intelligence anticipates that several of these products will gain approval from the Securities & Exchange Commission by January, further boosting Bitcoin’s value.
Weathering the Storm
Bitcoin’s resurgence from the 2022 crypto crash has endured a crackdown by the US government, led by the imprisonment of Sam Bankman-Fried for fraud at FTX and penalties imposed on major crypto exchange Binance and its founder Changpeng Zhao. Despite these challenges, optimists see this as a sign that the crypto industry is maturing and could attract a wider investor base with the introduction of ETFs.
Lingering Risks
However, there are potential risks that could derail Bitcoin, such as a reset in rate expectations or snags in the approval process for ETFs. Some technical indicators also suggest that Bitcoin’s rally may be reaching a stretch, but the financial and economic backdrop continues to be positive for the digital asset.
Halving and Future Prospects
One factor boosting sentiment is the upcoming Bitcoin halving, which will reduce the amount of tokens received by miners as rewards. This quadrennial event is part of the process that caps Bitcoin’s supply at 21 million tokens and has historically led to significant price increases for the asset.
Outpacing Other Assets
Bitcoin’s surge in 2023 has outpaced other traditional assets such as global stocks and gold. This has also led to increased interest in the derivatives market, with open interest reaching record levels at platforms like the CME Group and Deribit.
Impact on the Market
The surge in Bitcoin’s price on Monday also had a positive effect on crypto-related stocks in Asia, with companies like Japan’s Monex Group and South Korea’s Woori Technology Investment Co. experiencing gains. In the US, digital-asset exchange Coinbase Global Inc. and software firm MicroStrategy Inc., the largest publicly-traded corporate holder of Bitcoin, have seen substantial increases in their stock prices as well.
As the broader financial landscape and regulatory environment continue to evolve, Bitcoin and other digital assets are poised for further growth and adoption.
I have been a full-time professional writer for over 10 years, and have written for some of the biggest publications in the world. My work revolves around cryptocurrencies and blockchain technology, and I am widely considered to be one of the leading experts in these fields.I have written two books on the subject matter, and my articles have been featured in major news outlets such as The Wall Street Journal, Forbes, and Huffington Post. In addition to writing, I also give talks and seminars on cryptocurrency investing, and am a regular commentator on CNBC, Bloomberg, and other financial news networks.
