Macro Intelligence: Bitcoin bounces back, boom or bust?
Bitcoin skyrockets to record heights. Unpack the cryptocurrency's monumental surge and its potential to sustain the boom or face a bust.
Article written by Juliette Saly (ausbiz)
Bitcoin's boom
In this week’s edition of IG Macro Intelligence, we take a look at the recent surge in bitcoin, and whether it’s set for a BOOM or a BUST.
Bitcoin is back
The world's largest cryptocurrency has reached an all-time high, propelled by strong demand for Bitcoin ETFs.
The token has climbed above US$69,000 for the first time. In Australian dollar terms, bitcoin has also hit a record, exceeding AUD$100,000.
Bitcoin daily chart
Bitcoin's breakthrough in Aussie dollars
Kraken MD Jonathan Miller told ausbiz, the record in Aussie dollar terms is “a truly historic moment for the asset and the crypto industry as a whole.”
Driving the momentum is ongoing bullishness for spot Bitcoin ETFs, which launched in January. These ETFs now own 4% of all bitcoins, and have almost $50 billion in assets according to Bernstein data.
The demand for bitcoin has also stoked interest in smaller coins like ether and dogecoin, sending the value of the crypto market above US$2 trillion for the first time in two years.
CoinGecko estimates bitcoin's total market capitalisation at US$1.3 trillion, more than tripling its US$320 billion market cap at the end of 2022, known as the "Crypto Winter."
Global crypto market cap chart
The FOMO fever that fuels the crypto surge
The rally is not solely driven by demand for Bitcoin ETFs. The forthcoming halving, which curtails the growth of bitcoin's supply, contributes to the optimistic sentiment.
Additionally, speculation that the US Securities regulator might green-light more spot-ETFs, such as for Ethereum, is fuelling the rally.
Ethereum has surged over 50% year-to-date, trading above the crucial resistance level of US$3,500. It remains about US$1,000 below its all-time high of US$4,721 reached in November 2021.
Investor fear of missing out (FOMO) has also escalated demand, subsequently inflating prices for crypto assets. The "Crypto Fear and Greed Index," which gauges market sentiment based on the trading positions of bitcoin and other significant cryptocurrencies, is currently at 90. A score between 75 to 100 indicates "Extreme Greed."
Ether daily chart
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Crypto fear and greed index
Wall Street's warning: echoes of the dot-com bubble in bitcoin's surge
Analysts are split on whether bitcoin's recent rally signals sustained momentum or a looming bubble.
JP Morgan's Marko Kolanovic views the surge past US$60,000 and the dramatic equity rally as signs of market froth. Kolanovic is among several Wall Street analysts warning that the rapid ascent resembles the dot-com bubble or the market crash in late 2021 following post-pandemic euphoria.
Conversely, some analysts argue that this rally is different due to institutional interest spurred by the approval of spot-ETFs and the anticipated demand for bitcoin preceding April's halving.
Historically, bitcoin's value has spiked following each halving event, with some predictions suggesting bitcoin could reach US$80,000 by August.
Julius Baer's digital assets analyst, Manuel Villegas, is optimistic, noting the halving-induced shortage will spike demand. “All in all, we see a very sound fundamental backdrop for bitcoin and believe that prices are well supported around current levels with further upside potential,” he wrote.
Long-term bitcoin advocate, Ark's Cathie Wood, asserts that bitcoin is steadily replacing gold.
As of March 2024, bitcoin has outperformed traditional safe-haven assets like gold, marking a significant milestone in its journey.
Bitcoin vs gold's performance 2021 - 2024
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