Bitcoin Rallies to 2023 Highs on ETF & Fed Hopes

  • BTCUSD
    (${instrument.percentChange}%)

BTC/USD Analysis

The road towards the launch of spot crypto exchange-traded funds (ETFs) has opened after August's court ruling against the US Securities and Exchanges Commission (SEC) decision to reject Grayscale's application for such a Bitcoin product [1]. Markets have been increasingly optimistic for a favorable outcome and these hopes were renewed last week, as SEC officials met with Greyscale and BlackRock representatives, with the latter also looking to launch a spot iShares Bitcoin ETF. [2], [3]

At the same time, markets believe that the Fed is done hiking, anticipate as shift to rate cuts soon. These hopes were bolstered after Friday's speech by Mr Powell [4], which they perceived as dovish. CME's FedWatch Tool assign the highest probability to the first cut occurring in March, from May previously [5].

Expectations for spot crypto ETF's and less aggressive Fed stance have been key drivers for this year's Bitcoin rally and these developments send BTC/USD to new 2023 highs. It tries to take out the 50% Fibonacci of the 2021/2022 slump and look towards 48,256-48,560.

However, markets may be overly optimistic around a Fed pivot, as the central bank looks to a prolonged restrictive stance and Chair Powell warned of further tightening if needed. With inflation still above the 2% target, a tight labor market and the economy oveperforming, policymakers may need to act again to restore price stability.

Furthermore, the Relative Strength Index reveals highly overbought conditions, creating scope for a pullback to the EMA200 (35,917-35,400). Daily closes below it would be required for the bullish momentum to stop, but that looks like a toll order under current condition.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 04 Dec 2023 https://storage.courtlistener.com/recap/gov.uscourts.cadc.38827/gov.uscourts.cadc.38827.1208547574.0_2.pdf

2

Retrieved 04 Dec 2023 https://www.sec.gov/comments/sr-nysearca-2021-90/srnysearca202190-305159-785022.pdf

3

Retrieved 04 Dec 2023 https://www.sec.gov/comments/sr-nasdaq-2023-016/srnasdaq2023016-303319-781202.pdf

4

Retrieved 04 Dec 2023 https://www.federalreserve.gov/newsevents/speech/powell20231201a.htm

5

Retrieved 04 Mar 2024 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

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