Bitcoin Surges to 20-Month High, Crossing $42,000 Amid Rate Cut Expectations and ETF Speculation

Bitcoin's rally had a positive ripple effect on cryptocurrency-related companies and U.S.-listed exchange-traded funds (ETFs).

On Monday, Bitcoin experienced a significant surge, briefly surpassing the $42,000 mark and reaching its highest point in 20 months.

This sudden momentum can be attributed to growing expectations of a U.S. interest rate cut and speculation among traders that American regulators may soon approve exchange-traded spot bitcoin funds.

The world’s largest cryptocurrency reached $42,162, a level not seen since April 2022, signaling a shift in sentiment after a period of uncertainty following the collapse of FTX and other crypto businesses last year. As of 20:00 GMT, it was trading at $42,005, marking an 8.27% increase.

Bitcoin’s rally had a positive ripple effect on cryptocurrency-related companies and U.S.-listed exchange-traded funds (ETFs).

Coinbase saw a 7% jump in its stock price, while Microstrategy gained 6.3%.

Bitcoin mining companies like Riot Platforms, Marathon Digital, and CleanSpark also experienced notable gains ranging from 7% to 13%. Microstrategy disclosed its purchase of an additional $593 million worth of bitcoin in November.

The ProShares Bitcoin Strategy ETF, which tracks bitcoin futures, rose by 7.5%, while the ProShares Short Bitcoin Strategy ETF, allowing traders to bet on a decline in bitcoin futures, dropped by the same percentage.

Luuk Strijers, Chief Commercial Officer of crypto derivatives exchange Deribit, pointed out several factors contributing to Bitcoin’s remarkable ascent.

These factors included optimism regarding the potential approval of a spot bitcoin ETF by the U.S. securities regulator, the anticipation of central banks easing rate hikes to combat inflation, and the increasing engagement of institutional investors.

Bitcoin has already surged by over 150% since the beginning of the year.

Market sentiment has also been boosted by expectations that the U.S. Federal Reserve will shift from rate hikes to rate cuts in early 2024, benefiting riskier assets like cryptocurrencies and gold.

Reports in October indicated that the U.S. Securities and Exchange Commission (SEC) might be moving closer to approving a spot bitcoin ETF, following a court ruling against the agency’s previous rejection of such applications.

Investors are eagerly awaiting the possibility of multiple spot bitcoin ETF approvals in January, with demand expected to reach billions of dollars in the initial days of trading.

Additionally, the resolution of a longstanding U.S. criminal probe into Binance, the world’s largest crypto exchange, has contributed to positive sentiment among investors.

Ether, the cryptocurrency associated with the Ethereum blockchain network, also experienced a boost, rising more than 6% to reach $2,274.88.

However, both Bitcoin and Ether still remain below their record highs from 2021, which were $69,000 and $4,868, respectively.