Bitcoin (BTC) price is up today, topping over $44,200 and nearly reaching the 2023 high of $44,700. The rally highlights traders’ continued bullish bias for Bitcoin, which produced the best November performance since 2020 and remains on pace for the best December since that same year.
The bounce above $44,000 comes as Coinbase’s stock COIN has outperformed tech giants, reaching 400% gains on the year. The recovery may reflect the markets’ belief that a spot BTC exchange-traded fund (ETF) will be approved in January 2024, and the expectation of approval is matched with significant cash inflows from institutional investors in 2023.
Now that BTC has notched its best monthly close in 19 months and is on pace for four consecutive positive months, let’s look into the reasons why Bitcoin price is up today.
Bitcoin trading volume and transactions spike
The fear surrounding centralized exchanges seems to have all but vanished as volumes on the inflow and outflow side continue to rise in the months after the Binance settlement. The increase in Bitcoin inflows and outflows from exchanges potentially highlights an expansion of spot trading interest.
Bitcoin trading volumes are not only significantly higher than Ethereum (ETH) volumes, BTC on-chain transactions have also hit all-time highs. Bitcoin’s dominance may have been fueled by the unexpected rise in inscriptions.
The spike in transactions and increased exchange trading volume highlights renewed bullish optimism.
Potential spot BTC ETF approval boosts market sentiment
Despite a bevy of macro headwinds, Bitcoin price continues to push higher, achieving a 166% year-to-date gain with volatility increasing. Some Bitcoin analysts believe the Binance and DOJ settlement is bullish for a spot Bitcoin ETF approval, noting a similar deal achieved by Arthur Hayes and BitMEX.
Speaking on macro events and ETF developments, Markus Levin the co-founder of XYO Network notes,
“I think most analysts were surprised by the Fed’s suggestion that rate cuts could happen relatively early next year. I should note that it’s unclear how much risk assets would run, if at all, in the event of an actual rate cut. That said, the likely approval of these BTC ETFs is probably going to be a serious catalyst for Bitcoin and the rest of the digital asset market.”
While some analysts believe the Bitcoin price is pointing toward a breakout to $50,000, BTC has already more than doubled the 2023 returns of gold. MicroStrategy CEO and Bitcoin bull Michael Saylor believes a spot Bitcoin ETF would be the biggest to happen to all finance since the S&P 500 launched.
The positive sentiment around Bitcoin led the BTC market cap to surpass Berkshire Hathaway on Dec. 5, and it has remained the 10th-biggest asset by that measure. Despite BTC’s strength, the United States Securities and Exchange Commission (SEC) has refused to approve a spot Bitcoin ETF despite numerous applicants, including BlackRock, Fidelity, ARK Invest and 21Shares, with new players seemingly entering weekly.
On Dec. 19, BlackRock met with both the Nasdaq and SEC regarding the spot Bitcoin ETF. This marks the second meeting between BlackRock and SEC in December.
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According to reports, an approval may generate $600 billion in new demand. CryptoQuant analysts believe that an ETF approval will lead to a $1 trillion increase in Bitcoin’s market capitalization.
Galaxy Digital predicts a 74% price increase in the first year after a spot BTC ETF launch. The next window for the SEC to potentially approve a spot Bitcoin ETF is Jan. 5 through Jan. 10.
Despite the potential of approval in 3-weeks, Bitcoin traders have not necessarily started trading in a euphoric manner, a point supported by the current open interest shown in Bitcoin futures markets.
Year-to-date institutional investor inflows exceed $1.8 billion
While some investors may be awaiting increased liquidity and clarity from a spot ETF approval, institutional investors have already begun deploying funds to Bitcoin and crypto. According to CoinShares, institutional investors have pushed $1.86 billion into crypto in the past year. While institutional investors took profits last week, it ended an 11-week run of inflows.
Related: Why a gold rush for inscriptions has broken half a dozen blockchains
Of the $1.86 billion pushed to crypto assets in 2023, over $1.66 billion has flowed to Bitcoin specifically. In the month of December, $6.7 million of institutional inflow was for Bitcoin alone.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
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