Bitcoin (BTC) is up 9.4% to $87,475 this week,
retreating slightly from its all-time high of $90,030 reached on 12 November.
The primary driver of the recent rally has been Republican Donald Trump’s
victory in the U.S. presidential election on 5 November. Trump’s commitment to
positioning the U.S. as a global leader in the crypto industry, along with his
proposal to establish Bitcoin reserves, has proven drastically favourable for
crypto assets compared to the more sceptical stance of Democratic nominee Kamala
Harris. Bitcoin has surged 34.0% since the election, marking its largest
increase since February. This rally, however, comes as Bitcoin approaches
record highs daily, unlike earlier surges when all-time highs were less of a
factor.
While the election results have been a
significant catalyst, other upward factors are also in play. The first stage of
Bitcoin’s post-halving rally concluded on 20 October, with the election rally
merely delaying the price’s alignment with pre-established targets. Now, a 40% increase
from $64,624 (recorded on 20 April) has been realised. Options markets
currently indicate a potential rally ceiling of $90,000-100,000, suggesting
caution despite November and December being historically strong for the crypto
market. This could imply a gradual rise towards $100,000 by the end of 2024,
followed by a possible sharp pullback to $70,000-80,000. Recent retail investor
enthusiasm, especially among those using leverage, could eventually fuel a
correction if the rally begins to lose steam.
Discussions around Bitcoin reserves often
surface during record-setting periods, as seen in the spot BTC-ETF rally and
when Japan’s carry trade unwinding drove Bitcoin prices down to $49,035.
Following the recent rally, El Salvador's Bitcoin reserves have reached $510
million, or 1.5% of its GDP, while Bhutan's reserves now amount to $1.0
billion, about a third of its GDP.
Wall Street trends suggest potential pullbacks
at record highs, as such levels typically attract less experienced investors
seeking quick profits. Savvier investors may use these points to offload
positions, avoiding the effort of driving prices higher. Altcoins like Dogecoin
(DOGE), which has surged 190.0% since 5 November, offer alternative
opportunities, with other altcoins poised to follow. Consequently, crypto
investors are watching for any positive news within crypto projects that could
spark significant price spikes.
In addition, institutional funds like
BlackRock’s IBIT, Fidelity’s FBTC, and Grayscale’s GBTC reported net inflows of
$2.56 billion two weeks ago, $1.24 billion last week, and $239.7 million in the
first two days of this week. While institutional investment in Bitcoin remains
robust, cautious sentiment is increasing. A sustained Bitcoin rally remains
plausible, but the first phase appears to be nearing exhaustion, suggesting
that a pullback to shake out retail investors may be likely over the next two
to three months.