Bitcoin soared past $43,000 Tuesday afternoon, extending a rally some crypto analysts say is just the beginning.
Bitcoin is up more than 160% year to date. It hit highs on Tuesday not seen since April 2022, rallying close to 4% in 24 hours. Ether (ETH) similarly posted gains of close to 3%, moving the price to just under $2,300, also a level not hit since April 2022.
“[Bitcoin] dominance has risen as Bitcoin has strengthened its position as a global macro asset and demand for alternative stores of value has increased,” Hal Press, founder and CEO of North Rock Digital, wrote in a recent market outlook. “Demand has been mainly driven by [bitcoin] BTC’s more consistent price performance as a [store of value] as well as broader regulatory clarity due to an expected US spot BTC ETF approval.”
Analysts from crypto analytics and trading platform altFINS agreed that ongoing ETF optimism and increased institutional adoption is a driving force for this rally, but global macroeconomic trends will be important to watch.
“The global inflationary surge is quickly easing, with [the] Eurozone leading the way. It would be however premature to conclude with confidence that the Central banks had won the fight against high inflation and that they are now ready to ease,” altFINS analysts said Tuesday. “The market expects they will start cutting rates as soon as March 2024, however, they might be reluctant to signal such moves yet.”
The Federal Reserve is scheduled to release its next interest rate decision next week. According to data from CME Group, traders are all but certain the central bank will opt to keep rates exactly where they are.
Risk assets will continue to shift based on future policy, too. Analysts are also calling for interest rates to drop from their current level of 5.25% to around 4% by the end of 2024, though some economists say this is wishful thinking.
“Keep in mind, late last week the market priced in a year-end 2024 fed funds rate of just over 4% meaning well more than 100 basis points of easing next year,” Tom Essaye, founder of Sevens Report Research, said. “That’s very aggressive given Fed commentary and current growth/inflation.”
