Bitcoin reached $40,000 for the first time since May 2022 as the largest digital asset extended a rally on expectations of interest rate cuts and greater demand for exchange-traded funds.
The token was trading up about 1% at $40,005 as of 7:22 a.m. on Monday in Singapore, taking its 2023 jump to 142%. Bitcoin was at $40,000 before the TerraUSD stablecoin collapse, which contributed to a decline in digital assets and a daisy chain of collapses in the crypto sector.
Investors are becoming increasingly confident that the Federal Reserve will raise rates as inflation eases, focusing attention on the possibility of a cut next year. The changed backdrop has fueled the rally in global markets.
The digital-asset industry is also awaiting the outcome of applications from companies like BlackRock Inc. to launch the first U.S. spot bitcoin ETF. Bloomberg Intelligence expects a batch of such funds to receive Securities and Exchange Commission approval by January.
“Bitcoin continues to be supported by SEC approval for an ETF and optimism about a Fed rate cut in 2024,” Tony Sycamore, market analyst at IG Australia Pty, wrote in a note. That said, technical chart patterns point to $42,330 as the next level worth watching.
Bitcoin’s rebound from the 2022 crypto crash has faced US action that put Sam Bankman-Fried behind bars for fraud at FTX and handed top crypto exchange Binance and its founder Changpeng Zhao rap sheets and huge fines.
Optimists argue that the drive to curb questionable practices and the flood of ETF applications indicate a maturing industry and the potential for an expanding investor base for digital assets.
A reset in rate bets or an unexpected disruption to the ETF could still derail Bitcoin, but right now the market mood is upbeat.
One prop for the sentiment is the so-called Bitcoin transfusion taking place next year, which will cut in half the amount of tokens Bitcoin miners receive as a reward for their work.
The quadrennial event is part of the process of limiting the Bitcoin supply to 21 million tokens. The coin reached records after each of the previous three halvings.
Bitcoin and smaller tokens like Ether and BNB are still somewhat below the all-time highs achieved during the pandemic-era crypto bull run. The largest token reached a peak of nearly $69,000 in November 2021.