Why is Bitcoin price up today?

Bitcoin (BTC) price is up today, topping $42,866 after dipping as low as $40,300 over the weekend. The rally highlights traders’ continued bullish bias for Bitcoin, which produced the best November performance since 2020 and remains on a bullish trajectory in December. 

Bitcoin monthly returns. Source: Newhedge

The bounce back above $42,000 comes amid $4 billion BTC being sold in two days, setting an 18-month high. The recovery may show the markets’ belief that a spot BTC exchange-traded fund (ETF) will be approved in January 2024, and the expectation of approval is matched with significant cash inflows from institutional investors.

Bitcoin price. Source: TradingView

Now that BTC has notched its best monthly close in 19 months, let’s look into the reasons why Bitcoin price is up today.

Centralized exchange volumes spike

Initially, Bitcoin price flashed mixed signals after former Binance CEO Changpeng “CZ” Zhao’s guilty plea, and the exchange agreed to pay a $4.3 billion settlement to the U.S. Department of Justice (DOJ) on Nov. 21. After taking some time to digest the outcome, the market began to notice that Binance exchange was not having a mass exodus of funds like FTX did when its liquidity crisis first became public. Leaders in the crypto market, like Galaxy Digital CEO Mike Novogratz, see the settlement as a net positive overall.

The fear surrounding centralized exchanges seems to have all but vanished. Bitcoin exchange trading volume hit a 6-month high on Dec. 11. Despite having the lowest amount of volume for the month on Dec. 10, BTC trading spiked, accounting to over $16.4 billion the proceeding 24-hours.

Bitcoin exchange trading volume. Source: Newhedge

The lack of a major exodus from Binance coupled with increased exchange trading volume highlights renewed bullish optimism.

Exchange Bitcoin balances. Source: Coinglass

Potential spot BTC ETF approval boosts market sentiment

Despite a bevy of macro headwinds, Bitcoin price continues to push higher, achieving a 153.5% year-to-date gain with volatility increasing. Some Bitcoin analysts believe the Binance and DOJ settlement is bullish for a spot Bitcoin ETF approval, noting a similar deal achieved by Arthur Hayes and BitMEX.

The potential of a spot Bitcoin ETF approval has led to hodling, which remains 70% of the total available Bitcoin supply.

While some analysts believe the Bitcoin price is pointing toward a breakout to $50,000, BTC has already more than doubled the 2023 returns of gold

Bitcoin vs gold ratio. Source: Longtermtrends

The positive sentiment around Bitcoin led the BTC market cap to surpass Berkshire Hathaway on Dec. 5, and it has remained the 10th-biggest asset by that measure. Despite BTC’s strength, the United States Securities and Exchange Commission (SEC) has refused to approve a spot Bitcoin ETF despite numerous applicants, including BlackRock, Fidelity, ARK Invest and 21Shares, with new players seemingly entering weekly.

On Dec. 5, BlackRock reported receiving $100,000 in seed funding for its spot Bitcoin ETF. BlackRock has followed up on their application, filling an update on Dec. 12 after meeting with regulators. In the update, BlackRock contends the new ETF model offers “superior resistance to market manipulation.” While this is BlackRock’s first update, VanEck filled a fifth spot Bitcoin ETF update on Dec. 9.

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According to reports, an approval may generate $600 billion in new demand. CryptoQuant analysts believe that an ETF approval will lead to a $1 trillion increase in Bitcoin’s market capitalization.

Galaxy Digital predicts a 74% price increase in the first year after a spot BTC ETF launch. The next window for the SEC to potentially approve a spot Bitcoin ETF is Jan. 5 through Jan. 10.

Year-to-date institutional investor inflows exceed $1.8 billion

While some investors may be awaiting increased liquidity from a spot ETF approval, institutional investors have already begun deploying funds to Bitcoin and crypto. According to CoinShares, institutional investors have pushed $1.88 billion into crypto in the past year. This marks the 11th consecutive week of institutional inflows.

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Crypto asset institutional investor inflow. Source: CoinShares

Of the $1.88 billion pushed to crypto assets last year, over $1.7 billion has flowed to Bitcoin specifically. In the past week, $39.9 million of institutional inflow was for Bitcoin alone.

According to Bob Ras, the co-creator of Sologenic,

“Bitcoin rebounded rather quickly following the recent liquidations of long positions, suggesting that this uptrend experienced in recent months is still very much intact. A lot of accumulation is happening with any dip of late, and the size of the buys during these dips suggests that there are large institutions involved. It’s possible that major investment firms such as BlackRock and Fidelity are behind this Bitcoin accumulation, and there are unconfirmed reports suggesting that sovereign wealth funds in the Middle East may be accumulating Bitcoin as well. Whatever the case, there clearly are big buyers getting involved.”

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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