Bitcoin Rally to 42,000 Fueled by “Panic Buying” Pushes Crypto Market Capital to Over $1.5 Trillion
Bitcoin has reached a new annual high of $42,000. This brings the total market capitalization of all cryptocurrencies to $1.5 trillion.
Analysts said “panic buying,” bets on lower interest rates and anticipation of a Bitcoin ETF spot helped fuel the rally.
Bitcoin (BTC), a digital currency, hit a new 19-month high of over $42,000 on Monday thanks to some “panic buying” in anticipation of lower interest rates. The upcoming decisions on Bitcoin ETFs and inflows into digital asset funds also helped support rising crypto prices.
The largest crypto asset by market cap moved quickly over the weekend after breaking through significant resistance at $38,000. This was the price ceiling for most of November.
BTC was trading at $42,000 late Monday afternoon, up 5.8% in the last 24 hours.
XRP remained flat while Ether (ETH), BNB and ADA gained 2-3%. The AskFX Market Index, which tracks the performance of 200 cryptos, rose 4.2%.
Bitcoin’s growth pushed the market value of all cryptos to over $1.5 trillion, the highest since May 2022, when the Terra collapse heralded the start of the crypto winter. Show TradingView data.
The total cryptocurrency market cap rose to $1.52 trillion on Monday (TradingView).
Bitcoin’s growth is still largely dominated by expectations that a Bitcoin spot exchange-traded fund (ETF) will be approved by the US Securities and Exchange Commission. Market observers expect SEC approval in early January.
In a report published on Monday, Matrixport, a crypto investment services provider, pointed out the high premiums for Bitcoin perpetual futures compared to the spot price. This suggests that traders piled into BTC out of fear of missing out on the rally – or FOMO.
The report states that traders do not have enough upside leverage. This conclusion is based on the high premiums at which perpetual futures trade. Perpetual futures traded at a 5-10% premium to spot prices for most of the year, according to the report. This rose to 10-15% and sometimes reached 20-30%.
Matrixport analysts explained: “This shows panic buying by traders closing short positions or increasing leveraged long positions.”
According to the latest data, investors are still putting money into crypto funds. Fund flow report Asset manager CoinShares. The inflow streak is now 10 weeks long and amounts to $1.7 billion.
🟢 Record inflows! Last 10 weeks now total U$1.76bn inflows, the highest on record since October 2021’s futures-based ETF launch in the US.
Week 49 inflows: U$176 million
– #Bitcoin –
🟢 $BTC: U$133m inflows
🟢 Short Bitcoin: US$3.6m inflows
🔎 Trading volumes in ETPs remain… pic.twitter.com/Elon1F2pHl— CoinShares (@CoinSharesCo) December 4, 2023
The macroeconomic climate also supports the rise in Bitcoin’s price. Alex Thorn of digital asset investment firm Galaxy said that “dovish comments from some Fed officials and a weakening U.S. dollar helped boost markets last weekend.”
According to the Federal Reserve, market participants are betting increasingly expect the Federal Reserve to cut interest rates next year. The Fed’s key interest rate is expected to fall by 86% by May. CME FedWatch Tool.
Analysts said that while Bitcoin’s future looks promising, some near-term challenges could be on the horizon.
In a report published on Monday, Bitfinex analysts stated that despite the fact that selling pressure in the futures markets has been exhausted, there is no continuation in the spot markets.
The report states that this could be due to various reasons, such as short-term investors who were expecting lower prices but were caught off guard and are now waiting for confirmation before taking long positions. Or simply the interest of smaller market participants in altcoins, which is driven by higher returns.
Galaxy’s Thorn also pointed out that 85% of Bitcoin addresses are making profits and therefore “further increases could lead to profit-taking.”
Thorn stated that “Despite the surge, Bitcoin remains very positive,” with overhangs decreasing (bad actors exit, bankruptcy resolution), catalysts in sight (spot ETFs, halving), and holders remaining firm. He also noted a macroeconomic environment full of positivity, as well as institutional commitment that remained largely on the sidelines.
He said BTC is up more than 150% in the past year, making it one of the best-performing assets in the world on a risk-adjusted basis.
