FOMO helps Bitcoin reach $42,000, and the total market value of cryptocurrencies exceeds $1.5 trillion

Driven by expectations of Bitcoin spot ETF approval and bets on U.S. interest rate cuts , Bitcoin (BTC) hit a 19-month high, once breaking through $42,000. As of the close of U.S. stocks on Monday, it was trading at $41,809, up 5.8% in the past 24 hours. Ethereum (ETH), BNB and ADA rose 2% to 3% on the day, while XRP was flat. TradingView data shows that Bitcoin's rise has pushed the total market value of cryptocurrencies to more than $1.5 trillion, the first time since May 2022, when Terra's collapse kicked off a nearly 2-year bear market in the industry.

'Panic buying'

Analysts said expectations of a rate cut by the Federal Reserve , an upcoming spot Bitcoin ETF decision and inflows into digital asset funds supported the rise in cryptocurrency prices, triggering some "panic buying" and driving prices higher.

Bitpush previously reported that the SEC recently met with representatives from Grayscale, BlackRock , and Nasdaq. Last Thursday, the SEC met with Grayscale to discuss the possibility of GBTC converting to an ETF, a move the SEC had previously blocked. The new interaction seems to confirm the SEC's shift in attitude and strengthens the market's confidence that a Bitcoin ETF may eventually be approved.

Market observers overwhelmingly expect the SEC to approve a spot Bitcoin ETF in early January.

Cryptocurrency investment service provider Matrixport pointed out in a report on Monday that the high premium level of Bitcoin perpetual futures relative to the spot price indicates that traders are flocking to Bitcoin for fear of missing out on the rise.

“Traders do not have sufficient upside leverage, a conclusion drawn from the higher premiums that perpetual futures are trading at,” the report said. The report explained that for most of this year, perpetual futures have traded at a premium of about 5-10% to spot prices, with the premium widening to 10-15% and sometimes even reaching 20-30%.

“This indicates panic buying by traders who are closing shorts or adding leveraged longs,” said analysts at Matrixport.

According to the latest fund flow report from asset management company CoinShares , investors continue to pour money into crypto funds. Crypto funds saw net inflows of $172 million last week, the tenth consecutive week of net inflows, totaling $1.7 billion.

The macroeconomic environment also supports the rise in Bitcoin prices. Alex Thorn, head of research at digital asset investment firm Galaxy, said in a report: "Dovish comments from some Fed officials, a weak dollar, and relatively strong domestic data helped drive the market over the weekend."

Market participants are increasingly betting that the Federal Reserve will cut interest rates next year, with an 86% chance of a cut in May, according to the CME FedWatch tool.

Technical Analysis: Will Bitcoin Return to $45,000 Before Halving?

Crypto analyst @rektcapital posted on the X platform to assess the Bitcoin price trend and predicted that BTC could return to the $45,000 level before the fourth halving event scheduled for April 2024. The analyst pointed out the recurring trends in the past three cycles and predicted that after BTC hits $45,000, it will pull back to the $42,000 level.

Santiment analysts evaluated the BTC price uptrend and found that market participants have a fear of missing out (FOMO). Analysts believe that Bitcoin prices may return to $50,000 sooner or later, depending on whether BTC traders take profits or continue to buy, allowing high demand to drive further increases.

Antoni Trenchev, co-founder of digital asset company Nexo , said on the X platform: "For the first time in nearly 19 months, we have re-entered $40,000. $48,000 and $52,000 seem to be the next important boundaries."

He stressed: “The speed at which Bitcoin moves toward $50,000 will likely depend on when a spot Bitcoin ETF is approved, and even then there is no guarantee that approval will give Bitcoin prices a ‘rocket boost’.”

Caution is needed in the short term

Analysts say that while the outlook for Bitcoin looks bright, there could be some resistance in the short term.

“A cause for concern is the lack of follow-through in the spot market despite the exhaustion of selling pressure in the futures market,” Bitfinex analysts said in a report on Monday. “The reasons could be multifaceted, including short-term investors still expecting prices to fall and therefore being caught off guard and now waiting for confirmation before entering long positions, or simply smaller market participants being driven by the high returns of altcoins,” the report added.

Galaxy analyst Thorn noted that another reason for caution is that about 85% of Bitcoin addresses are in profit, so "further upside could see profit-taking."

However, Thorn is still optimistic about the subsequent trend. He said: "Despite the run, Bitcoin's fundamentals have not been destroyed, pending factors are decreasing (bad actors exit, bankruptcy resolution), catalysts are about to appear (spot ETFs, halving), holders remain firm, and a constructive macro environment and institutional participation remain the dominant forces."

“With a year-to-date gain of over 150%, Bitcoin is one of the best performing assets in the world from a risk-adjusted perspective,” he said.