Bitcoin Price Tops $42K on the Back of ETF Optimism and Wagers on US Interest Rate Decline

Bitcoin price made the headlines on Monday after jumping more than 5%, ripping its highest level since April 2022. The world’s largest cryptocurrency hit an intraday high of $42,154, bolstered by enthusiasm about a spot bitcoin exchange-traded fund approval and bets on US interest rate cuts. At the time of writing, the flagship cryptocurrency was trading 4.15% higher at $41,645.90. Bitcoin’s market capitalization has climbed by more than 5% over the last day to $814.7 billion, as the total volume of the BTC tokens traded over the same period rocketed by 102%.

Fundamentals

Bitcoin price was in the limelight on Monday, starting the new month on a high note. Bitcoin has climbed more than 152% in the year to date, on course for its best annual performance since 2020. This comes after a string of high-profile collapses in 2022, including the collapse of crypto exchange FTX in November last year, that rocked the market, leading to outflows of more than a trillion dollars from the crypto sector.

The major catalyst behind BTC’s rally has been the anticipation of a spot bitcoin ETF approval by the US Securities and Exchange Commission (SEC). The SEC has been formally engaging with asset managers ahead of a highly anticipated decision on whether the regulator will give the green light for the trading of bitcoin ETFs. The Wall Street regulator stated in a memo that it met with Grayscale last week on Thursday to discuss the potential conversion of the Grayscale Bitcoin Trust (GBTC) into an ETF. Earlier in August, the U.S. Court of Appeals for the D.C. Circuit ruled in favor of Grayscale in a lawsuit against the SEC which had denied the company’s application to convert its GBTC into an ETF.

Investors’ bets that the Fed’s rate-hiking cycle is over have also boosted riskier assets in financial markets. while giving his remarks on Friday, Fed Chair Jerome Powell said that the Federal Reserve is ready to tighten policy further if needed, but also noted that interest rates are well into the restrictive territory and are slowing inflation. His comments buoyed hopes that the central bank is done raising interest rates for now.

Bitcoin Price Technical Analysis

The daily chart shows that the Bitcoin price has been on a strong bullish rally since the start of the new month, topping the critical $40,000 level for the first time since April 2022. The digital asset remains above the 50-day and 200-day exponential moving averages and the 50-day and 100-day simple moving averages. Its Relative Strength Index (RSI) has moved higher into the overbought territory, suggesting an increase in buying pressure.

The technical indicators show that bulls have taken full control. Consequently, I expect the Bitcoin price to continue moving higher in the medium term as buyers eye the next important resistance at $45,000. A breach above this level may open doors to the highly coveted $50,000 level. However, we cannot rule out a drop below the immediate support at $39,865, which would invalidate my bullish thesis.

BTC Price Chart