Acceptance by mainstream institutions and increasing likelihood of lower rates fuel crypto market

Vijay Valecha, Khaleej Times, March 5, 2024

Bitcoin, the largest cryptocurrency by market value has gained 50 per cent this year, after it rallied to a two-year high on Monday, breaking above $65,000.

The price hit a session high of $65,537 in Europe, Reuters reported, having already hit a new two-year high in Asian trading. It was last up 4 per cent at $65,045. Bitcoin hit a record $68,999.99 in November 2021.

Most of the rise come in the last few weeks where inflows into US-listed bitcoin funds have surged, as a wave of money carried it within striking distance of record levels..

The total market capitalisation of bitcoin is $1.26 trillion, with a 24-hour trading volume of $34.65 billion, according to data.

The global crypto market has witnessed a remarkable surge, with its total cap surging over 8 per cent to reach $2.33 trillion. As the largest crypto token, Bitcoin’s market capitalisation soared by about 11 per cent, reaching a total valuation of $1.24 trillion.

This surge in Bitcoin’s value is attributed to several key factors, according to Vijay Valecha, Chief Investment Officer, Century Financial. “Firstly, the ongoing Bitcoin halving has historically influenced the token’s value, with past events leading to substantial price hikes. Additionally, the approval of Bitcoin exchange-traded funds (ETFs) has facilitated institutional inflows, further contributing to the market rally. Rumours surrounding Jeff Bezos, Amazon’s founder, expressing interest in the digital asset class have also fuelled Bitcoin’s surge,” Valecha told Khaleej Times.

The introduction of ten Bitcoin ETFs in the US set a new daily record, with a trading volume exceeding $7.7 billion. Notably, BlackRock’s Bitcoin ETF traded $3.3 billion on Wednesday, doubling its previous volume record, showcasing the growing demand.

Bitcoin’s stellar performance in the first two months of 2024 is evident, with a surge of over 50 per cent. In February alone, Bitcoin recorded a remarkable 45 per cent increase, and in the last week, the token gained approximately 25 per cent, reaching around $63,500, Valecha noted.

Market sentiment is gradually shifting towards the ‘extreme greed’ category, as Bitcoin approaches its all-time high of $69,000. “ Optimism in the crypto space is further supported by the possibility of the US Federal Reserve cutting interest rates this year amid easing inflationary pressure. Market experts believe that the current rally is predominantly driven by institutional players, with less retail participation,” Valecha said.

As March unfolds, Bitcoin is poised to potentially surpass its previous highs, with the countdown to the next halving event in mid-April adding to the anticipation. Despite indications of a possible strengthening of the dollar index, technical indicators for bitcoin/US dollar suggest a positive outlook. The overall improvement in liquidity has signalled to investors to engage with the crypto market robustly.

In the meantime, Bitcoin maintains its upward momentum, despite existing uncertainties, the recent performance of Bitcoin indicates that the digital currency is poised for a positive outlook.

Bitcoin’s price trajectory in 2024 is contingent upon a confluence of potential bullish and bearish catalysts. “As of today, the overall sentiment surrounding Bitcoin is positive, with the Fear & Greed Index registering an extreme greed reading of 79. This optimism is further corroborated by recent price performance, with Bitcoin experiencing 19 out of the last 30 days (63 per cent) exhibiting positive returns and an overall volatility of 8.37 per cent,” Yusuf Mansawala, Chief Market Analyst, CPT Markets, said in a note. Resistance levels are seen at $65,876, indicating potential price direction in the near term, he added.

The recent settlement between Binance and US authorities, which included CEO Changpeng Zhao’s potential departure, marked a significant development. Notably, the absence of accusations regarding client fund misuse and the lack of a “bank run” on the exchange were viewed positively by the market, contributing to a subsequent price rally for Bitcoin and other cryptocurrencies.

Signals from the US Federal Reserve suggesting a potential peak in the current interest rate hike cycle could be a catalyst for further Bitcoin appreciation in 2024, Mansawala said. “When interest rates stabilise or decline, Bitcoin, perceived as a hedge against traditional financial systems and boasting increasing scarcity due to the upcoming halving, becomes a potentially more attractive investment option for institutional players,” he added.

The May 2024 halving, which will see the block reward for mining Bitcoin decrease from 6.25 bitcoin to 3.125 bitcoin, has the potential to further bolster Bitcoin’s price as the supply of new coins is reduced.

Mansawala sees bitcoin at a potential high of $155,285, with the possibility of hitting a yearly low of $57,682. In 2026, CPT Markets predicts a yearly high of $179,158 and yearly low of $125,690.

Since the launch of the Bitcoin ETF last month, year-to-date inflows have surpassed over $5 billion. “As the market inches toward the bitcoin halving, we may see a new bitcoin all-time high by early May. Ethereum broke $3,400, which is yet to have a similar rally as Bitcoin, and is expected to hold these levels strongly until the halving. Etherium-spot ETFs could send the second-largest crypto to new all-time highs,” said Manhar Garegrat, Country Head, India & Global Partnerships at Liminal Custody Solutions.

Shivam Thakral, CEO of BuyUcoin, India’s second-longest-running digital asset exchange, said: “Bitcoin’s price is one step closer to its all-time high as Bitcoin ETFs broke their trading volume record with a huge day at $7.69 billion. It may be possible to see a new all-time high in Bitcoin before halving this year.”

Analysts maintain that the institutional bullish sentiment is strong, and with 51 days remaining until the Bitcoin halving, coupled with expectations of a mid-year Fed rate cut, Bitcoin is expected to find support at $60,000, potentially experiencing volatility in March to challenge historical highs. Resistance above is seen at $64,000 and $69,000, while support below is in the range of $52,000 to $56,000.

“According to past cycles, there is a possibility that BTC will experience further growth to reach a peak within six months to a year and a half after halving, and Etherium may follow suit with a breakthrough. With the entry of leading mainstream financial institutions, it can be anticipated that collective market forces will drive Etherium to achieve a historical high in 2024, surpassing $4,900,” said Ryan Lee, Chief Analyst at Bitget Research.

According to past cycles, there is a possibility that BTC will experience further growth to reach a peak within six months to a year and a half after halving, and Etherium may follow suit with a breakthrough. “With the entry of leading mainstream financial institutions, it can be anticipated that collective market forces will drive Etherium to achieve a historical high in 2024, surpassing $4,900, Lee added.

Source

Khaleej Times