Bitcoin climbs above $45k as analysts prepare for an ETF-inspired ‘massive price spike’

The cryptocurrency market started 2024 off in the way it finished 2023 – climbing higher, as the community counts down the days to the anticipated approval of the first spot Bitcoin (BTC) exchange-traded fund (ETF), which could come by Wednesday, January 10.

Stocks fared worse after closing last year near record highs, falling under pressure at the market open on Tuesday and largely trading in the red throughout the day as traders await Friday’s December jobs report, which could provide additional insights into the Fed’s thinking on interest rates moving forward.

At the closing bell, the S&P and Nasdaq finished lower, down 0.57%, 1.63%, respectively, while the Dow gained and 0.07%. The U.S. 10-year Treasury yield briefly spiked to 4.024% but has since pulled back to 3.941%, while the DXY increased 0.80% to trade at 102.233 at the time of writing.

Data provided by TradingView shows that Bitcoin bulls started to push its price higher on Monday afternoon, driving it from $42,745 to a high of $45,925 in the early hours on Tuesday before mild profit-taking led to a pullback to support at $45,000, where it currently trades.

The early morning rally was reflected in the derivatives market, as “January Bitcoin futures prices [were] solidly up and hit a contract high in early U.S. trading Tuesday,” according to Kitco senior technical analyst Jim Wyckoff.

“Bulls have gained fresh power by producing a bullish upside ‘breakout’ from the recent trading range at higher levels,” Wyckoff said. “A price uptrend also remains in place on the daily bar chart. Bulls have the solid overall near-term technical advantage.”

“After the typical mid-to-end December consolidation, Bitcoin is poised to break out on a robust beginning-of-the-year buying flow,” said Markus Thielen, head of research at Matrixport. “A year ago, most market participants were bearish and therefore under-positioned. However, things turned out differently, with stocks and cryptocurrencies rising significantly.”

“Institutional investors cannot afford to miss out on any potential rally again and, therefore, have to buy immediately when the markets open for trading in 2024,” Thielen said. “We expect an immediate rally that once again catches investors off-guard.”

He said that if a spot BTC ETF is approved next week, Matrixport “expects Bitcoin prices to rise significantly,” and said they see it as unlikely that “this will be a ‘sell-the-news’ event as approval would legitimize Bitcoin as an asset class for institutional portfolios that could be used as collateral to buy other assets.”

“Instead, the risk might be on the upside as $5-10 billion dollars in fiat money might not find enough Bitcoin on exchanges to gain exposure for Bitcoin ETFs,” he said. “After the 2022 bankruptcies and the FTX crypto exchange implosions, many Bitcoin holders have moved their BTC off exchanges, and familiarity with cold-storage options has increased. The result is that 70% of the outstanding Bitcoins have remained ‘unmoved’ during the last twelve months.”

As the U.S. enters an election year, Thielen noted that the average return for BTC during the 2012, 2016, and 2020 election cycles was +192%. “This could lift Bitcoin into our $125,000 target, which we set in July 2023 based on our ‘one-year-new-high’ indicator,” he said.

He also highlighted that the Bitcoin funding rate “remained elevated during the holiday period,  indicating that crypto traders have stayed very bullish and expect an imminent Bitcoin ETF approval.”

These factors, combined with the lack of ample BTC liquidity on exchanges, could be setting the stage for a “massive price spike,” Thielen said, adding, “The Bitcoin price move this year could surprise everybody.”

“Although we are not seeing minting activities at Tether increasing, which would signal fiat into crypto inflows, the fact that prices are rallying might be a sign that there are no sellers in the market and prices are squeezing higher,” he said. “This morning, the funding rate is reaching a new high at +66%. This means longs pay shorts 66% per year to stay long.”

“This is how the futures market is squeezing the spot market and will likely lift Bitcoin above our $50,000 target level for January 2024, which appears reasonably achievable,” Thielen concluded. “We could trade above $50,000 by the end of this week.”

Traders rotate out of alts and back into Bitcoin

A slight majority of tokens in the top 200 recorded losses on Tuesday as traders shifted their focus to Bitcoin amid the ETF hype.

SKALE led the winners with an increase of 23% to trade at 0.0862, while Astar (ASTR) climbed 16.4%, and Maker (MKR) gained 12.2%. Tellor (TRB) was the biggest loser, falling 13.5% to trade at $168, followed by a loss of 13.1% for Helium Mobile (MOBILE), and a decline of 9.6% for Optimism (OP).

The overall cryptocurrency market cap now stands at $1.72 trillion, and Bitcoin’s dominance rate is 51.1%.