Global markets start the new year on a gloomy note, but Bitcoin defies the trend with a "red hot" start.
The global market started the new year on a gloomy note, with Bitcoin rising against the trend by more than 6% to reach $45,300. Investors are optimistic about the approval of the first spot Bitcoin exchange-traded fund (ETF) in the United States, but it is still uncertain whether the actual approval will become a reason for speculators to profit. Digital assets are also benefiting from expectations of a rate cut by the Federal Reserve. The weakness in the stock market reflects investors' repricing of loose monetary policies, and cryptocurrency prices may fluctuate. K33 Research estimates that there is a 75% chance that the SEC will approve the Bitcoin ETF, and a 20% chance that the Bitcoin price will rise further.
Zhitong App has learned that Bitcoin has risen by more than 6% in the first three days of January, which is in stark contrast to the sluggish start of the global market this year. As of the time of writing, the trading price of Bitcoin in London has exceeded $45,300, thanks to expectations that the United States will soon approve the country's first spot Bitcoin exchange-traded fund (ETF). The general optimism towards cryptocurrencies has also encouraged the rise of smaller currencies such as Solana and Avalanche.
In contrast, US stock index futures struggled to gain traction after a decline in the US stock market on Tuesday, the first trading day of 2024. The rise in the US dollar index further indicates investors' cautious attitude. Analysts such as James Seyffart from Bloomberg expect the US Securities and Exchange Commission (SEC) to approve a batch of spot Bitcoin ETF applications by the final deadline on January 10. The token has risen by 172% in the past 12 months, and investors are betting that this product will help boost Bitcoin demand.
The question now is whether the actual approval will become a reason for speculators to profit, considering that ETFs have not yet definitively made Bitcoin a mainstream asset. Analysts Anders Helseth and Vetle Lunde from K33 Research wrote in a report, "We do not expect the ETF to immediately attract massive inflows of capital; therefore, it may be classified as a 'sell the news' event." However, they added that these products indicate a long-term structural shift in buyer interest.
K33 estimates that there is still a 5% chance that the SEC will make a "shocking decision" and reject the launch of an ETF that directly invests in Bitcoin. The company believes that there is a 75% chance that the approval of Bitcoin will be a "sell the news" event, and a 20% chance that the Bitcoin price will further rise due to ETF inflows.
Digital assets have also benefited from bets on the Federal Reserve's interest rate cut in 2024. The weakness in the stock market at the beginning of the year reflects, to some extent, a repricing of these predictions. If investors continue to lower their expectations for loose monetary policy, cryptocurrency prices may fluctuate.
Sean Farrell, the head of digital asset strategy at Fundstrat Global Advisors LLC, wrote in a report that the rising cost of betting on the rise in Bitcoin prices in the futures market indicates "speculative excess" in the bull market of this token. He said, "The financing costs at these levels typically precede volatility, and the direction of volatility will depend on recent fund flows."