Bitcoin Surpasses $40,000 Milestone: What’s Behind the Cryptocurrency’s Resurgence?

2 mins read

The crypto market is witnessing its best performance since May 2022, with Bitcoin and Ethereum breaching the $41,000 and $2,200 marks, respectively. The latest rally has taken the total crypto market cap to the $1.54 trillion, a 2023 high. Experts say the growing confidence in the crypto market has been fuelled by expectations of the US Federal Reserve cutting interest rates in 2024 and the eventual approval of a Bitcoin ETF, which could drive up the price of the world’s largest cryptocurrency. 

“This surge represents a year-to-date peak for Bitcoin, showcasing an impressive 140% increase since the beginning of the year. More than just a numerical value on a chart, the surge in Bitcoin price reflects a broader shift in the sentiment around crypto. The current upward trend is largely attributed to mounting expectations of a potential approval by the SEC for a spot Bitcoin ETF in January,” said Rahul Pagidipati, CEO, ZebPay.

At the macro level, anticipation of interest rate cuts by the Federal Reserve has propelled commodity prices higher. Gold has hit historic highs, and Bitcoin has rebounded by nearly $15,000 over the past month. With the potential for a US economic recession, fund managers predict an 80% consensus level for a trend of interest rate reduction in 2024, marking the highest consensus level ever recorded. The crypto market has already factored in this positive news, explained Ryan Lee, Chief Analyst of Bitget Research.

“The US Committee on Financial Services calling a December 8 hearing on digital assets may lead to a strong regulatory framework focusing on investor protection, highly beneficial for the broader digital asset market. The growing optimism around Bitcoin ETF approval will continue to create waves of positive sentiments within the global digital asset community, and we can expect this momentum to sustain in the coming weeks,” said Shivam Thakral, CEO of BuyUcoin, India’s second-longest-running digital asset exchange.

Bitcoin had plunged to about half its value from the peak in 2021, following which trading volumes for crypto exchanges in India have plunged more than 90% since February 1, 2022. This was because Bitcoin plunged after the failure of some prominent crypto exchanges like FTX and the end of an era of ultralow interest rates. In India, Union Finance Minister Nirmala Sitharaman imposed a 30% tax on crypto gains and a 1% tax deducted at source (TDS) on all ‘sell’ transactions on February 1, 2022.  

“In the crypto market, Bitcoin has surpassed $40,000 without encountering significant resistance. Within 24 hours, short positions on Bitcoin contracts worth $54 million were liquidated, significantly weakening the bearish forces. The market may undergo an overall accelerated upward revision. Furthermore, a new asset category within the Bitcoin ecosystem, ORDI, surged over the weekend, indicating a strong speculative sentiment in the market,” added Lee.

Earlier, Standard Chartered Bank had predicted that Bitcoin could touch $120,000 by the end of 2024. However, many remain sceptical about this asset class, including the legendary Warren Buffett. The Oracle of Omaha famously said at Berkshire Hathaway’s annual meeting in 2022 that if someone offered him all the Bitcoin in the world for $25, “I wouldn’t take it, because what would I do with it?”

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