Why bitcoin keeps rallying even as stocks and bonds take a hit

Smaller tokens, such as ether and meme-favorite dogecoin, also rose. Bitcoin Cash jumped 9 percent and an indicator of the 100 largest cryptocurrencies added more than 4 percent. Cryptocurrency-linked companies in the US were able to dodge an otherwise weak day in the stock market: exchange operator Coinbase jumped 5.5 percent, miner Marathon Digital rose 8.6 percent and bitcoin proxy MicroStrategy rose 6.7 percent.

The crypto industry is awaiting the outcome of applications from companies such as BlackRock to Launch First Spot Bitcoin ETFs in US. Bloomberg Intelligence expects a batch of these products to win regulatory approval in January.

Halving Bitcoin

Bitcoin's revival following last year's cryptocurrency crash has withstood a US crackdown that put Sam Bankman-Fried behind bars for fraud at FTX and handed major cryptocurrency exchange Binance and its founder Changpeng Zhao a criminal record and big fines.

Optimists say the push to curb shady practices and potential ETFs indicate a maturing crypto industry and the potential for a broader investor base.

Recent law enforcement actions “have instilled confidence among investors,” said Su Yen Chia, co-founder of Asia Crypto Alliance.

A restart in interest rate bets or unexpected problems for ETFs could still derail bitcoin, and some technical indicators suggest the virtual currency's rally is on the verge.

For example, bitcoin's weekly relative strength index, a momentum indicator, closed above 75 for the past two weeks. Readings above 70 are considered to indicate "overbought" conditions.

However, over the past decade, bitcoin has risen an average of 15 percent over the following month after printing a weekly RSI of more than 75, according to data compiled by Bloomberg.

Bitcoin's jump this year has outperformed assets such as global stocks and gold. In the derivatives market, open interest recently advanced to historic levels on the CME Group for bitcoin futures and on the Deribit platform for options on the highest-profile cryptocurrency.

A boost to sentiment is the so-called bitcoin halving coming next year, which will halve the amount of tokens bitcoin miners receive as rewards for their work. The quadrennial event is part of the process of capping the supply of bitcoins at 21 million tokens. The currency hit records after each of the last three halves.

"We could see bitcoin hit $50,000 before any major correction," said Cici Lu McCalman, founder of blockchain advisory Venn Link Partners. She cited the halving and the outlook for US monetary policy as some of the reasons.

Despite the latest rally, bitcoin and the broader crypto market are still somewhat below the all-time highs reached during the pandemic-era crypto bull run. The largest token peaked at nearly $69,000 in November 2021.


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