Bitcoin Surges Past $42,000

Lingering Risks

A reset in rate bets or unexpected snarls for the ETFs could yet derail Bitcoin, while some technical indicators suggest the virtual currency’s rally is stretched.

For instance, Bitcoin’s weekly relative-strength index, a momentum gauge, closed above 75 for the past two weeks. Readings above 70 are viewed as signaling “overbought” conditions.

At the same time, Bitcoin in the past decade rose an average 15% over the subsequent month after printing a weekly RSI of more than 75, according to data compiled by Bloomberg.

Bitcoin’s jump in 2023 has outstripped assets such as global stocks and gold. In the derivatives market, open interest recently advanced to landmark levels at the CME Group for Bitcoin futures and at the Deribit platform for options on the most high-profile crypto coin.

Bitcoin Halving

One prop for sentiment is the so-called Bitcoin halving due next year, which will cut in half the amount of tokens that Bitcoin miners receive as reward for their work.

The quadrennial event is part of the process of capping Bitcoin supply at 21 million tokens. The coin hit records after each of the last three halvings.

“We could see Bitcoin run toward $50,000 before any major correction,” said Cici Lu McCalman, founder of blockchain adviser Venn Link Partners. She cited the halving and the outlook for US monetary policy as among the reasons why.

Bitcoin and the wider crypto market are still some way below the all-time highs achieved during the pandemic-era crypto bull run. The largest token peaked at almost $69,000 in November 2021.

The lift in digital-asset prices at the start of the week filtered across crypto-linked stocks in Asia. Japan’s Monex Group and Woori Technology Investment Co. in South Korea were among the beneficiaries.

In the U.S., digital-asset exchange Coinbase Global Inc. and software firm MicroStrategy Inc. — the largest publicly-traded corporate holder of Bitcoin — are both up more than 270% year-to-date.

MicroStrategy last month bought $593 million more of the token, taking its pile to roughly $6.5 billion.

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