Bitcoin closing in on record highs: What next?

Bitcoin, the largest cryptocurrency by market value has gained 50 per cent this year, after it rallied to a two-year peak on Tuesday, breaking above $68,600 and stalking the all-time high.

On Tuesday, it was at $68,500 in Asian hours, having reached a session high of $68,828, a whisker away from the all-time peak of $68,999.99 it set in November 2021, Reuters, reported.

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 has topped $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 $1.26 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.