Welcome back to Distributed Ledger. This is Frances Yue, reporter at MarketWatch.
Bitcoin
BTCUSD,
had an impressive rally this week, rising from around $30,000 on Sunday to above $35,000 at one point, according to CoinDesk data, with a spike up in retail and institutional inflows. The cryptocurrency is trading Thursday at around $34,000.
The rally was mostly based on optimism that an exchange traded fund investing in bitcoin will be soon approved in the U.S. The U.S. Securities and Exchange Commission rejected several applications for such products in the past, citing vulnerability to market manipulation, but there were signs that things could change.
Bitcoin has gained almost 110% so far this year, but is still more than 50% below the peak at $68,990 reached in November, 2021.
I spoke to a few industry participants to see if this week’s rally is sustainable and whether bitcoin is on a path to reach a new all-time high.
Find me on Twitter at @FrancesYue_ to share any thoughts on crypto or this newsletter.
Path to the top?
The chances of bitcoin reaching a new all-time high before the halving event, which is expected to take place in April next year, is very low, according to Anthony Rousseau, head of brokerage solutions at TradeStation.
Bitcoin halving refers to a process where block rewards given to crypto miners are cut in half after every 210,000 blocks are mined, or about every four years. Historically, bitcoin prices tend to appreciate after a halving, but it usually takes about three to six months after the event for the crypto to reach a cyclical high, Rousseau noted.
For now, macroeconomic uncertainty remains a dominating factor for risk asset prices, with investors worrying that the Federal Reserve may keep its key interest rate higher for longer which could raise the risks of a recession in the U.S.
Thus, “you’re still looking at a year before you can predict any probabilities of bitcoin achieving an all-time high,” Rousseau said.
John Glover, chief investment officer at crypto lender Ledn, said he doesn’t expect the Federal Reserve to start cutting interest rates until the end of 2024 and risk asset prices could be hampered until then.
However, bitcoin is sometimes “counter-cyclical to the market,” Glover said. “I think Bitcoin still has the ability to go up even when equity markets and fixed income markets go down,” he said, adding that the crypto could be seen as a safe haven at times.
Glover said he expects bitcoin to trade in the range of $30,000 and $37,000 by the end of the year, while reaching up to $45,000 by the end of the second quarter next year.
“I don’t think that we’re gonna go straight line higher though” Glover said. “We’ll definitely get corrections and I can see us very easily trading down to $30,000 or $31,000 in the coming weeks as we await more news from the SEC [about the bitcoin ETF,]” he said.
Meanwhile, a lot of short positions have been wiped out in the lastest rally, which potentially means less leverage and volatility in the coming weeks, Glover noted.
Crypto in a snap
Bitcoin
BTCUSD,
gained 20.1% in the past seven days and was trading at around $34,014 on Thursday, according to CoinDesk data. Ether
ETHUSD,
rose 17% during the same period at around $1,785.
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