Bitcoin Rally to $42K Fueled by ‘Panic Buying,’ Pushes Crypto Market Cap Over $1.5T

Bitcoin

(BTC)
hit
a
fresh
19-month
high
above
$42,000
Monday,
fueled
by
some
“panic
buying”
as
expectations
for
lower
interest
rates,
looming
spot
bitcoin
ETF
decisions
and
flows
into
digital
asset
funds
supported
rising
crypto
prices.

The
largest
crypto
asset
by
market
capitalization
moved
quickly
over
the
weekend
after
it
cleared
significant
resistance
at
$38,000,
a
level
that
capped
prices
for
the
most
part
of
November.

BTC
late
Monday
afternoon
was
holding
right
around
$42,000,
up
5.8%
over
the
past
24
hours.

Smaller
tokens
lagged
behind,
with
ether

(ETH),
BNB
and
ADA
gaining
2%-3%
during
the
day,
while
XRP
traded
flat.
The
CoinDesk
Market
Index

(CMI)
–
which
tracks
the
performance
of
some
200
cryptos
–
was
up
4.2%.

Bitcoin’s
rise
pushed
the
total
crypto
market
value
to
over
$1.5
trillion
for
the
first
time
since
May
2022,
when
Terra’s
collapse
marked
the
beginning
of
the
crypto
winter,

TradingView
data
shows.

Bitcoin’s
rise
is
still
dominated
by
anticipation
for
a
spot
bitcoin
exchange-traded
fund
(ETF)
in
the
U.S.,
with
market
observers
overwhelmingly
expecting
an
approval
by
the
U.S.
Securities
and
Exchange
Commission
(SEC)
in
early
January.

See
more:



Bitcoin
Spot
ETFs
Could
See
Inflows
of
$14.4B
in
First
Year,
Galaxy
Says

Crypto
investment
services
provider
Matrixport
noted
in
a
Monday
report
the
elevated
levels
of
bitcoin
perpetual
futures
premium
versus
the
spot
price,
suggesting
that
traders
rushed
into
BTC
driven
by
fear
of
missing
out
–
or
FOMO
–
of
the
rally.

“Traders
do
not
have
enough
upside
leverage,
this
is
the
conclusion
from
the
elevated
premium
that
perpetual
futures
are
trading
at,”
the
report
said.
Perpetual
futures
traded
at
around
5-10%
premium
versus
the
spot
price
for
most
of
the
year,
which
widened
to
10-15%,
with
sometimes
hitting
20-30%,
the
report
explained.

“This
shows
panic
buying
from
traders
who
are
closing
out
shorts
or
increasing
leveraged
longs,”
Matrixport
analysts
said.

Investors
show
no
sign
of
stopping
throwing
money
into
crypto
funds,
according
to
the
lastest

fund
flows
report
from
asset
manager
CoinShares.
Last
week
saw
another
$172
million
of
net
inflows,
bringing
the
inflow
winning
streak
to
10
weeks
and
$1.7
billion.

The
macroeconomic
environment
also
supports
bitcoin’s
price
rise.
“Dovish
talk
from
some
Fed
officials,
a
weakening
dollar,
and
relatively
sturdy
domestic
data
helped
propel
markets
over
the
weekend,”
Alex
Thorn,
head
of
research
at
digital
asset
investment
firm
Galaxy,
said
in
an
email.

Market
participants
increasingly
bet
on
the
Federal
Reserve
cutting
interest
rates
next
year,
putting
an
86%
probability
of
lower
Fed
funds
rate
by
May,
according
to
the

CME
FedWatch
Tool.

While
bitcoin’s
outlook
looks
bright,
there
are
some
possible
short-term
headwinds
looming,
analysts
said.

“The
reason
for
concern
is
that
even
though
selling
pressure
was
being
exhausted
in
the
futures
markets,
there
was
a
lack
of
follow-through
from
spot
markets,”
Bitfinex
analysts
said
in
a
Monday
report.

“The
reason
could
be
multifold,
including
short-term
investors
still
anticipating
lower
prices
being
caught
off-guard
and
now
waiting
for
confirmation
before
entering
long
positions
or
simply
interest
from
smaller
market
participants
being
driven
towards
higher
returns
on
altcoins,”
the
report
added.

Another
reason
for
caution
is
that
some
85%
of
bitcoin
addresses
are
sitting
in
profits,
Galaxy’s
Thorn
noted,
so
“further
moves
higher
could
see
profit
taking.”

“Despite
the
run,
bitcoin
remains
very
constructive,”
Thorn
said
with
overhangs
reducing
(bad
actors
exiting,
bankruptcies
resolving),
catalysts
on
the
horizon
(spot
ETFs,
halving),
holders
remaining
firm,
a
constructive
macro
environment,
and
institutional
engagement
still
mostly
on
the
sidelines.”

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