Bitcoin has experienced a remarkable surge of over 140% this year, surpassing other investment options such as stocks and gold, creating optimism for potential further gains.
This exceptional performance follows a turbulent period for the cryptocurrency. After a cryptocurrency market crash last year, Sam Bankman-Fried, the founder of FTX, is currently in jail for fraud. Additionally, Binance, a major exchange, and its founder Changpeng Zhao recently pleaded guilty to US anti-money laundering and sanctions violations, resulting in fines of $4.3 billion and $50 million, respectively.
The question arises: Does Bitcoin’s return to the $40,000 level indicate the maturation of the industry and the beginning of another bull run, or could the token face disruptions again?
Here’s everything you need to know:
Why has Bitcoin Surpassed $40,000?
The recent surge in Bitcoin’s value can be attributed to expectations that the Federal Reserve will reduce interest rates and the anticipation of increased demand from exchange-traded funds (ETFs). The last time Bitcoin reached this level was in April of last year, before the collapse of the TerraUSD stablecoin.
The industry is eagerly awaiting decisions on applications from entities like BlackRock Inc. to launch the first US spot Bitcoin ETFs. Bloomberg Intelligence anticipates regulatory approval for a batch of such funds by January.
Another influencing factor is the upcoming Bitcoin halving, scheduled for next year. More on that shortly.
What is a Spot Bitcoin ETF?
A spot Bitcoin ETF is similar to any other exchange-traded fund but directly invests in Bitcoin. This marks a first for the US, as existing ETFs focus on Bitcoin futures rather than the spot market for the asset. Investors gain direct exposure to the current market price of the token.
What is Bitcoin Halving?
Bitcoin halving is an event where the reward for Bitcoin miners is halved. This occurs every four years and is part of the process to limit the Bitcoin supply to 21 million tokens. The coin has set records following each of the last three halving events.
For a more detailed explanation of halving, click here.
What is the Price Outlook for Bitcoin?
Bitcoin is currently benefiting from a strong tailwind. Optimists view the efforts to regulate questionable practices and the surge in ETF applications as signs of industry maturity, opening the door to a broader investor base for digital assets.
Simultaneously, the belief that the Federal Reserve has concluded its rate hikes has fueled a market rally worldwide.
However, potential setbacks for planned ETFs or a shift in rate expectations could still pose risks to Bitcoin. Some technical chart patterns, like the weekly relative-strength index, indicate “overbought” conditions. zoom, zoom, zoom, zoom, zoom, zoom, zoom, zoom
Expert Opinions:
Michael Novogratz, founder and CEO of Galaxy Digital Holdings Ltd., predicts that Bitcoin is on track to reach its previous peak within a year. He anticipates that once Bitcoin ETF trading begins, billions of dollars will flow into the ETF space within the first year.
Despite these positive projections, not everyone is enthusiastic. Charlie Munger, vice chairman of Berkshire Hathaway Inc. who recently passed away at 99, referred to Bitcoin as “noxious poison” and cautioned that digital assets were “partly fraud and partly delusion.”
In a 2022 interview with CNBC, Munger stated, “That’s a bad combination. I don’t like either fraud or delusion. And the delusion may be more extreme than the fraud.”
