Bitcoin reached over $42,000 on Monday, marking a rally of more than 150% since the beginning of 2024, as reported by Bloomberg on Dec. 3. This surge brings the leading cryptocurrency to levels not seen since April 2022, before last year’s significant $2 trillion crypto market crash.
The resurgence of Bitcoin coincides with growing optimism that the Federal Reserve is approaching the end of its rate hike cycle as inflation shows signs of abating. This has led to a risk-on rally in global financial markets, with investors anticipating potential rate cuts in 2024, which could boost speculative assets such as cryptocurrencies.
“Bitcoin continues to be supported by optimism regarding SEC approval for an ETF and Fed rate cuts in 2024,” said Tony Sycamore, an analyst at IG Australia Pty. Technical indicators point to $42,330 as the next resistance level to monitor if the rally persists.
Crypto’s rebound
Other major cryptocurrencies, including Ether, Dogecoin, and Bitcoin Cash, also experienced gains on Monday, with the market cap of the top 100 cryptos increasing by over 5%.
Despite recent disruptions such as the FTX collapse, which resulted in fraud charges against founder Sam Bankman-Fried, and regulatory crackdowns targeting dubious activities, the crypto market has shown signs of recovery. Proponents argue that the push for stricter regulations indicates the maturation of a $1 trillion industry. Moreover, investor confidence has been bolstered by the anticipation of potential SEC approval for the first Bitcoin spot ETFs in early 2024 and the prospect of offerings from major players like BlackRock, which could expand the investor base for cryptocurrencies.
Remaining risks
Bitcoin could face downward pressure if market expectations of rate cuts suddenly change. Additionally, technical indicators suggest that the current rally may be overextended and due for a correction, as Bitcoin’s RSI momentum indicator is signaling being “overbought.”
However, historical data shows that following previous overbought signals, Bitcoin continued to surge higher in the subsequent month. Furthermore, its breakout in 2024 has already outpaced the gains of assets such as stocks and gold.
Another potential catalyst for upside is the scheduled 2024 Bitcoin “halving” event, which involves halving the token rewards for miners to limit supply.
“We could witness Bitcoin rallying towards $50,000 before experiencing a significant correction,” predicted blockchain adviser Cici Lu McCalman, citing the halving event and the policy outlook.
Featured Image Credit: Photo by Crypto Crow; Pexels
