Bitcoin rises to $42,000 due to panic buying ─ Market capitalization of all crypto assets exceeds $1.5 trillion | CoinDesk JAPAN

• Bitcoin hit a year-to-date high of $42,000, and the total market capitalization of crypto assets (virtual currencies) exceeded $1.5 trillion for the first time since May 2022.
• Analysts said bets on lower interest rates, hopes for Bitcoin spot ETFs and “panic buying” contributed to the rally.

Bitcoin (BTC) hit a new 19-month high on the 4th, exceeding $42,000 (approximately 60.9 billion yen, equivalent to 145 yen per dollar), spurred by some “panic buying.” Expectations for lower interest rates, an impending decision on a Bitcoin spot ETF, and inflows into digital asset funds supported crypto markets.

Bitcoin moved rapidly over the weekend after breaking through the key resistance level at $38,000 that had capped the upside for most of November.

By late afternoon on the 4th, the stock was hovering around $42,000, up 5.8% over the past 24 hours.

Other crypto assets were lagging behind, with Ethereum (ETH), Build and Build (BNB), and Cardano (ADA) up 2% to 3% on the day, while XRP (XRP) was flat. The CoinDesk Market Index (CMI), which measures the performance of the entire crypto asset market, rose 4.2%.

According to TradingView data, the rise in Bitcoin has pushed the total market capitalization of the crypto asset market to $1.5 trillion for the first time since May 2022, when the crypto winter began with the collapse of Terra (LUNA). (approximately 217.5 trillion yen).

The total market capitalization of crypto assets rose to $1.52 trillion on the 4th (TradingView)

Why Bitcoin rose

Bitcoin’s rise is still driven by expectations for the US Bitcoin spot ETF (Exchange Traded Fund), with market participants predicting that it will be approved by the US Securities and Exchange Commission (SEC) in early January. There is an overwhelming sense of hope.

Crypto asset service provider Matrixport said in a report on Thursday that the level of premium for Bitcoin’s perpetual futures over spot bitcoin has been rising, with traders experiencing “FOMO” (missed opportunities) on rising prices. He suggested that people rushed into Bitcoin out of fear of missing out.

“Traders do not have sufficient upward leverage; this is a corollary to the rising premium at which perpetual futures are trading,” the report said. Perpetual futures have been trading at a premium of around 5-10% to spot prices for most of this year, but that range has widened to 10-15% and sometimes as high as 20-30%. I explained that there was.

“This is indicative of panic buying by traders who are closing out shorts and increasing leveraged longs,” Matrixport analysts said.

There is no sign that investors will stop pouring money into crypto funds, according to the latest fund flow report from CoinShares, one of Europe’s largest asset managers. Last week saw net inflows of $172 million, the 10th consecutive week of excess inflows, bringing total net inflows to $1.7 billion.

The macroeconomic environment is also supporting Bitcoin’s price rise. Alex Thorn, head of research for digital asset investments at crypto asset management firm Galaxy Digital, said in an email that some US Federal Reserve officials have “Historical rhetoric, a weaker dollar and relatively strong domestic indicators pushed markets higher over the weekend.”

Market participants are increasingly betting that the Fed will cut interest rates next year, with the Chicago Mercantile Exchange’s (CME) FedWatch tool showing an 86% chance of a cut in the federal funds rate by May.

Reasons why you need to be careful in the future

Analysts said that while the outlook for Bitcoin looks bright, there could be headwinds in the short term.

Analysts at crypto exchange Bitfinex said in a report on the 4th: “The reason for concern is that even as selling pressure is drying up in the futures market, there is a lack of follow-through from the spot market.” “It’s about being there,” he said.

“There could be multiple reasons for this, including short-term investors still expecting a surprise sell-off and waiting for confirmation before entering long positions, or simply smaller market participation,” the report said. This is due to the fact that investors are paying more attention to the higher returns of altcoins.”

Elsewhere, Galaxy’s Thorne noted that about 85% of Bitcoin addresses are profitable, so “we could see some profit-taking if it goes up further.”

“Despite the rally, Bitcoin remains very positive,” Thorne said, citing declining overhangs (bad actors exiting, bankruptcy resolutions) and material on the horizon (cash ETFs, halving). ), citing strong ownership, a positive macro environment, and the involvement of institutional investors.

“Bitcoin is up more than 150% year-to-date and is one of the world’s best-performing assets on a risk-adjusted basis,” Thorne said.

｜Translation and editing: Rinan Hayashi
｜Image: CoinDesk
｜Original: Bitcoin Rally to $42K Fueled by ‘Panic Buying,’ Pushes Crypto Market Cap Over $1.5T