Bitcoin touched fresh record levels this week, climbing to heights not seen since late 2021 as it hovered around 69,191.95 before slipping back toward the 65,000 area. The rally built on a rapid ascent from prior lows, with the asset showing a strong recovery even after an intraday dip that tested the 38,500 mark earlier in the year.
Over the past year, Bitcoin has surged more than 195 percent, and the last twelve months have delivered an overall gain near 108 percent in 2023. The push into new all-time highs also translated into euro terms, where a key resistance level around 62,400 euros was finally breached, marking a similar pattern of strong yearly gains and a substantial quarterly climb in value.
Analysts highlight resilience in Bitcoin despite past declines. Alex Thorn, director of research at Galaxy Digital, notes that Bitcoin has endured four declines exceeding 75 percent in its 15-year history and has historically bounced back. This perspective underscores the asset’s ability to rebound after sharp corrections and its ongoing relevance in digital asset markets.
A positive monetary policy
Bitcoin’s performance followed a challenging 2022, when tightening monetary policy contributed to a sizable drawdown as inflation cooled. The US consumer price index hovered around 3.1 percent in January, compared with 3.4 percent at year-end, after peaking at 9.1 percent during the prior year. The policy backdrop has shifted toward more accommodative measures as inflation moderates.
In December, the Federal Reserve signaled expectations for rate cuts in 2024, with the target range standing around 5.25 percent and the potential for reductions if inflation stays in check. Market participants are watching for signals from policymakers on the timing and size of future adjustments.
Federal Reserve Chair Jerome Powell is expected to discuss monetary policy with Congress, with potential implications for the pace of rate changes. If inflation shows continued improvement and markets price in favorable outcomes, a rate cut could arrive as early as June, potentially extending the current growth and risk-on cycle. Conversely, if inflation momentum remains stubborn, a delay in cuts could trigger market adjustments and a recalibration of expectations. Investors are pricing in a probability of a 25 basis point cut in June, though the timing remains contingent on incoming data.
Household expectations about a looser monetary stance, combined with favorable macro signals in Europe and the United States, have supported a rally across equities and growth-oriented assets. The Nasdaq Composite index, among others, reached new highs as investors oriented toward sectors expected to benefit from lower funding costs and improved liquidity conditions.
The big push into ETFs
The recent price strength coincides with a wave of capital flowing into new exchange-traded funds, a trend accelerated by regulatory approvals in early 2024. Notably, a leading ETF focused on bitcoin exposure surpassed the 10 billion dollar mark in assets under management, illustrating strong investor appetite for regulated, spot-based exposure to the cryptocurrency space.
Industry leaders observe that the momentum is driven by a fresh batch of spot ETFs, which could be contributing to more active trading dynamics on weekdays. This environment has led some market participants to anticipate further price moves as demand remains robust for these newly available vehicles.
Commentators emphasize that the current market setup may foster short-term sideways consolidation before more pronounced moves, reflecting the ongoing tug-of-war between demand for regulated crypto exposure and broader market risk considerations.
Retail shareholders are coming back
Retail investors, often nicknamed crypto enthusiasts in social channels, are re-entering the market. Bitcoin’s ascent is lifting other digital assets as well, pointing to renewed participation from individual traders who were less involved during portions of the rally. The broader recovery is seen as a sign of pent-up retail demand returning to the market as sentiment brightens.
Ethereum, the second-largest cryptocurrency by market capitalization, has also posted meaningful gains along the year, with other major tokens showing notable year-to-date improvements. The renewed interest from retail players is viewed as a potential driver of continued volatility and opportunity in the space.
Reducing Bitcoin emissions
Industry observers attribute the price strength in part to expectations around the next halving cycle, projected to occur between March and June 2024. The halving reduces the rewards paid to miners approximately every four years, a mechanism that historically coincides with price appreciation as supply growth slows. With roughly 19.5 million bitcoins already in circulation, the event aligns with the longer-term thesis of capped supply and gradual issuance decline. Investors are monitoring the cadence of halvings as a potential catalyst for new highs over the ensuing 12 months.