Bitcoin hovered above $43,000 on Wednesday after its longest winning run since May, amid questions about whether the breakout reflects growing optimism about looser US Federal Reserve monetary policy.
The largest digital asset added roughly 16% in the six days through Tuesday, and was consolidating the gains in early European trading on Wednesday. It was quoted at $43,700 on CoinDesk on Wednesdsay aftermoon.
The 2023 rebound of Bitcoin from last year’s crypto rout now stands at 163%.
Analysts say much of the rally has been driven by the prospect of the United States allowing its first spot Bitcoin exchange-traded funds (ETF), paving the way to develop a wider investor base. Two of the biggest funds in the US, BlackRock and Fidelity Investments, are among those awaiting the outcome of their applications, with some analysts expecting a green light by January.
But ETF hype has shadowed Bitcoin since June, when asset managers began seeking approval to introduce the funds. That has led some to ask if the token’s surge is now drawing more impetus from wagers on Fed interest-rate cuts next year.
“Surely the ETF story is well and truly priced?” said Tony Sycamore, a market analyst at IG Australia. The high volatility, “jet-fuelled” move up in Bitcoin is instead a reminder that crypto is “more responsive to a Fed pivot and policy than other asset classes”, he said.
For now, Bitcoin momentum is overshadowing any concerns that the surge is at risk of becoming too stretched. Smaller virtual currencies such as Avalanche and the meme-crowd favorite Dogecoin have also been advancing.
The bullish overall mood is evident in a range of countries. Bitcoin on the Upbit and Bithumb exchanges in South Korea was trading about 4% above the prevailing global price on Wednesday, a return of the “kimchi premium” that made headlines during the pandemic-era bull run in digital assets.
In Abu Dhabi, the crypto mining hardware retailer Phoenix Group Plc jumped 35% on its debut on Tuesday. The firm is the first crypto-related listing in the Middle East. In El Salvador, Nayib Bukele said in a posting on X this week that his country’s Bitcoin investments had turned profitable. He is running for re-election after stepping down as president last week.
Another prop for sentiment is the next “halving” due next year, which will cut in half the amount of tokens that Bitcoin miners receive as rewards for their work. The quadrennial event is part of the process of capping Bitcoin supply at 21 million tokens. The coin hit records after the last three halvings.
“Both micro and macro factors are currently lining up for Bitcoin,” said Zach Pandl, managing director of research at the crypto fund provider Grayscale Investments.