As 2023 comes to an end, whether Bitcoin, which has doubled in price, can break through $40,000 has become the biggest concern of many cryptocurrency speculators. The largest digital asset has rebounded about 130% in the past 11 months since the 2022 cryptocurrency crash, outpacing investments like stocks or gold. Hopes for the Federal Reserve to cut interest rates next year and expectations that the United States will soon approve the listing of the first spot Bitcoin ETF have stimulated strong optimism in the market.
Bitcoin’s rally has come amid increased U.S. regulation of the cryptocurrency industry, with Sam Bankman-Fried jailed for fraud at FTX. For optimists, efforts to curb questionable practices within the industry and the recent flurry of ETF applications indicate that the cryptocurrency industry is maturing and has the potential for wider adoption.
CityIndex Ltd. Fiona Cincotta, a senior financial markets analyst, said: "(Bitcoin) reaching $40,000 only requires the approval of a spot Bitcoin ETF." She added that Bitcoin has lost some upward momentum recently, in part because of large fluctuations in stocks and foreign exchange markets that have attracted investors' attention.
Bloomberg Intelligence predicts that a group of U.S. spot Bitcoin ETFs will receive approval from the U.S. Securities and Exchange Commission (SEC) before January next year. While a recalibration of interest rate bets or unexpected ETF dislocation could derail the Bitcoin rally, for now, market sentiment remains positive.
MicroStrategy (MSTR.US), the listed company with the largest Bitcoin holdings in the world, bought another US$593 million worth of Bitcoin last month, bringing its total to approximately US$6.5 billion. Galaxy Digital Holdings Ltd. Founder Michael Novogratz said on Wednesday that Bitcoin could reach a peak of nearly $69,000 in 2021 in a year.
technical analysis
From a technical perspective, Bitcoin’s weekly relative strength index (RSI) closed above 75 last week. While readings above 70 are considered an “overbought” signal, the situation may not be that simple. Over the past decade, after a weekly RSI above 75, the coin has risen an average of 15% in the following month – a gain that would take it well over $40,000.
However, the MACD indicator, a technical indicator that attempts to capture the momentum behind an asset’s movements, shows a weakening of Bitcoin’s recent moves, with the indicator reading negative when looking at the span of the bars. Meanwhile, Bitcoin has struggled to break above $38,000 recently.
IGAustraliaPty market analyst Tony Sycamore said that Bitcoin has tried to reach $38,000 many times. But “every breakout has failed. Still, I do think there’s a good chance Bitcoin will break through $40,000, either following the ETF announcement or risk assets resuming their gains before the end of the year.”
In the options market, according to Deribit data, Bitcoin options positions suggest that the token is likely to fluctuate between US$37,000 and US$40,000 in December. Given that traders who sold bull calls with a $40,000 strike price were apparently willing to take bets from the other side, this suggests that this level will serve as a key testing area for Bitcoin’s recovery.