Bitcoin Rally and the Path to the Top

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Bitcoin (BTCUSD) has witnessed an impressive rally this week, surging from approximately $30,000 on Sunday to surpass $35,000 at one point, as per CoinDesk data. This surge can be attributed to increased retail and institutional inflows. Currently, the cryptocurrency is trading at around $34,000.

The rally primarily stems from the optimism surrounding the potential approval of a Bitcoin exchange-traded fund (ETF) in the United States. Despite previous rejections by the U.S. Securities and Exchange Commission (SEC) citing concerns over market manipulation vulnerability, recent signs indicate a possible change in stance.

Although Bitcoin has experienced a remarkable 110% gain this year, it remains over 50% below its peak of $68,990 reached in November 2021. To gain insights into the sustainability of this week’s rally and the potential for Bitcoin to reach new all-time highs, I reached out to industry experts.

Is a New All-Time High on the Horizon?

Anthony Rousseau, head of brokerage solutions at Trade Stations, believes that the chances of Bitcoin reaching a new all-time high before the upcoming halving event in April next year are quite slim. The halving event refers to the reduction in block rewards given to crypto miners by half after every 210,000 blocks (approximately every four years). While historical trends indicate an appreciation in Bitcoin prices following a halving, it typically takes three to six months for the cryptocurrency to reach a cyclical high after the event, Rousseau explained.

Macroeconomic Uncertainty and its Impact on Risk Asset Prices

Macroeconomic uncertainty continues to be a significant factor influencing risk asset prices, as investors express concerns over the Federal Reserve’s potential decision to maintain higher interest rates for an extended period. This, in turn, heightens the risks of a potential recession in the United States.

According to Rousseau, it may take approximately a year before any reliable predictions can be made regarding the likelihood of Bitcoin reaching an all-time high. The chief investment officer at crypto lender Ledn, John Glover, echoed this sentiment, suggesting that interest rate cuts by the Federal Reserve might not occur until the end of 2024, which could continue to impede risk asset prices.

Merely reflecting Glover’s perspective, Bitcoin occasionally exhibits a counter-cyclical behavior compared to the broader market. Glover emphasized that Bitcoin has the potential to ascend even when equities and fixed income markets experience a downturn. As a result, it can sometimes be viewed as a safe haven asset during turbulent times.

Glover projected that by the end of this year, Bitcoin would trade between $30,000 and $37,000, with expectations of reaching up to $45,000 by the conclusion of the second quarter next year. However, he cautioned against expecting a straightforward upward trajectory, predicting corrections along the way. He anticipates the possibility of trading down to $30,000 or $31,000 in the next few weeks as investors await further news from the Securities and Exchange Commission (SEC) regarding the bitcoin exchange-traded fund (ETF).

Glover also observed that recent market activity had resulted in the elimination of numerous short positions. Consequently, this could potentially lead to reduced leverage and decreased volatility in the upcoming weeks.

Crypto in a Snap

During the past seven days, Bitcoin (BTCUSD) recorded an impressive gain of 20.1% and was trading at approximately $34,014 as of Thursday, according to CoinDesk data. Similarly, Ether (ETHUSD) experienced a notable rise of 17% during the same period, reaching around $1,785.

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