Bitcoin’s Strong Start in 2024 Sparks Speculation on Mainstream Asset Shift

In a surprising departure from the gloomy tone prevailing in global markets during the first days of January, Bitcoin posted a 6% gain after trading above $45,300 as of 6:50 a.m. Wednesday.

The resilience of the largest digital asset has defied the lackluster start seen in traditional markets, especially in US equity futures, which struggled for traction after a drop in American stocks on the first trading day of 2024.

The optimistic momentum is attributed to growing expectations that the US is on the verge of allowing the country’s first spot Bitcoin exchange-traded funds (ETFs).

Bloomberg Intelligence analyst James Seyffart is among those anticipating that the Securities & Exchange Commission (SEC) will greenlight a batch of spot Bitcoin ETF applications by the January 10 deadline.

This optimism has driven Bitcoin’s value up by 172% in the past 12 months, with investors betting that ETFs will stimulate increased demand for the cryptocurrency.

The pivotal question now centers around whether the anticipated approval of spot Bitcoin ETFs will trigger a profit-taking scenario among speculators.

Analysts from K33 Research suggest caution, foreseeing a potential “sell-the-news” event in the short term, as mega immediate inflows to the ETFs might not materialize.

However, they emphasize that this development signifies a more profound and lasting shift in buyer interest.

While K33 Research estimates a 75% chance of approval resulting in a “sell-the-news” event, they assign a 20% probability to a further increase in Bitcoin prices due to ETF inflows.

Also, there is a 5% chance, according to the research firm, that the SEC may reject the ETF launch efforts, though this outcome is deemed less likely.

Digital assets, including Bitcoin, have also been buoyed by speculations that the Federal Reserve will implement interest rate cuts in 2024.

The recent weakness in traditional stocks is seen as a reassessment of these projections, and crypto prices could experience fluctuations if investors continue to adjust their expectations regarding looser monetary policy.

Notably, the increasing cost of bets on rising Bitcoin prices in the futures market serves as an indicator of emerging speculative excess in the ongoing bullish run.

Sean Farrell, the head of digital-asset strategy at Fundstrat Global Advisors LLC, highlights that funding costs at these levels typically precede volatility, and the direction of that volatility will hinge on near-term flows.

As Bitcoin maintains its bullish trajectory, market participants are closely watching for the SEC’s decision and its potential implications for the broader cryptocurrency landscape.

The outcome could mark a turning point, propelling Bitcoin further into the financial mainstream or prompting a recalibration of market expectations.