(Bloomberg) -- Bitcoin topping $42,000 is just the start of a fresh crypto supercycle that will push the world’s biggest token above $500,000 in what adherents say is the new monetary order taking Wall Street by storm.
Such is the palpable sense of euphoria within the digital-assets community right now, where the largest token is coming off its third month of gains, adding another 11% so far in December to trade at its highest since the market began to implode in April 2022. All of the excitement about the surge is bringing out hyped-up predictions about further gains — most of them based on little else than intuition or obscure technical analyses.
The cryptocurrency is in the midst of a revival few saw coming this year. It’s added more than 150% so far in 2023 as many market-watchers anticipate an exchange-traded fund that directly holds the token could soon be approved to trade in the US. The jubilation prompted Coinbase CEO Brian Armstrong, for instance, to post that “Bitcoin may be the key to extending western civilization.” Meanwhile, the prophecies for how high the coin could go spanned anywhere from $50,000 in the immediate term, to above $530,000.
“It’s getting crazy again,” said Matt Maley, chief market strategist at Miller Tabak & Co. “Those kinds of comments show just how quickly sentiment can change for this asset class.”
“I would argue that one of the most important reasons Bitcoin rallied so strongly in 2020 and 2021 was because of the massive influx of liquidity into the system due to the pandemic,” Maley added. “Without another huge liquidity program, some of those predictions are a pipe dream.”
A US Bitcoin-based ETF has been long awaited, with the idea being that such a product would allow money managers to buy it for clients with greater ease, which could eventually bring billions of dollars of new investments to the space.
Read more: Wall Street Managers Weigh Up $100 Billion Era for Bitcoin ETFs
“Since mid-October, we’ve observed a real shift in the market driven by rising institutional enthusiasm around the possible approval of a spot BTC ETF, and more recently, an improving macro environment,” wrote Kaiko researchers in a note. They also point out that crypto investment products have seen inflows in recent days, and that daily spot-trading volumes in November hit a seven-month high.
It’s not unusual for excitement about a wider crypto rally to spread like wildfire on X, the platform formerly known as Twitter. A lot of crypto discourse takes place there, and digital-asset fans are known for posting memes poking fun at disbelievers for missing out on gains. But Bitcoin has been through many such hype cycles in recent years, with gains being celebrated even as the coin still needs to gain another 65% from current levels to reach its 2021 all-time high of roughly $69,000. Past runs have ended with busts, with Bitcoin dropping 64% last year after a 60% gain in 2021.
That’s been no deterrent for the crypto faithful, who have been tweeting about Bitcoin going “parabolic” and Bitcoiners rejoicing about the rebound. Others reiterated the often-cited — and often-debunked — point that cryptocurrencies can be a “flight-to-quality” asset, meaning that they can be a haven during turbulent times.
Many more taunted bears for their failure to foresee the big surge, alluding to a once-widely spread meme within the space that is known by the acronym HFSP, which stands for “have fun staying poor.”
“The combination of ETF speculation and now hope on interest-rate-cut-easing is another speculative frenzy,” said Michael O’Rourke, chief market strategist at JonesTrading. “Are people who have been waiting for the ETF and missed a $20,000 rally going to pay double because it is an ETF? Probably not,” he said, adding that “the asset is purely speculative gambling and in the 14 year it has been around, it has not exhibited any true utility other than speculation and illicit money transfer.”
©2023 Bloomberg L.P.
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