Bitcoin prices briefly topped $35,000 this week for the first time since May 2022.
Dreamstime
Bitcoin
and other cryptocurrencies steadied on Wednesday, paring gains slightly on the back of a big rally. But analysts see further upside ahead for Bitcoin and not just because of the prospect that spot Bitcoin exchange-traded funds will soon launch.
The price of Bitcoin has shed less than 1% over the past 24 hours to around $34,200, with the largest digital asset paring gains after briefly topping $35,000 on Tuesday—its highest level since May 2022, when cryptos began to slide into a brutal bear market. Bitcoin remains up by some 30% in less than two weeks amid hopes that the Securities and Exchange Commission (SEC) will soon allow the first exchange-traded funds (ETFs) that hold Bitcoin to begin trading.
“The crypto market is attempting to settle at the previous day’s highs,” said Alex Kuptsikevich, an analyst at broker FxPro. “However, the relative strength index on the daily timeframe is highly overbought, suggesting that short-term speculators should be looking for a corrective pullback. Looking at the longer term, the current setup for Bitcoin seems very promising for the bulls.”
While the prospect of SEC approval of spot Bitcoin ETFs—which could catalyze a fresh wave of investor interest—has been a key force behind crypto’s better performance than the
Dow Jones Industrial Average
and
S&P 500,
it isn’t the only force.
“As the broader stock market has struggled, Bitcoin has benefited and appreciated in value,” said James Butterfill, head of research at digital asset investment manager CoinShares. Butterfill cited not only ETF optimism but also the fact that Bitcoin’s correlation to the S&P 500 and
Nasdaq
stock indexes has faded while its link to gold prices has increased, in what could be a sign that traders see Bitcoin as a haven asset.
“The correlation between gold and Bitcoin is now positive and has decoupled from the rest,” said Butterfill. “Further solidifies the parallels between Bitcoin and gold in times where investors look for a flight to safety.”
Geopolitical risk amid new conflict in the Middle East has raised hackles among investors and seen traders flock into gold, long seen as a safe bet in times of turmoil that rock the stock market. Bitcoin could increasingly play this role, said Butterfill. While Bitcoin has long been dubbed “digital gold” by its proponents, the largest crypto has not always performed as a haven asset, though its increasing link to gold could be a sign that this is changing, especially with respect to geopolitical risk.
“In an analysis from 2015 onwards, Bitcoin has responded positively to increased geopolitical risk … an increase in geopolitical risk has led to positive 30-day returns for Bitcoin,” said Butterfill. “The data is showing that in fact investors do turn to Bitcoin as a flight to safety.”
Beyond Bitcoin,
Ether
—the second-largest crypto—lost 3% to $1,780. Smaller tokens or altcoins also fell back, with
Cardano
down 1% and
Polygon
slipping 3%. Memecoins were also in the red, with
Dogecoin
and
Shiba Inu
each shedding 3%.
Write to Jack Denton at [email protected]
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