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December 4, 2023

Santa Rally Starts Early As Bitcoin Soars Straight Past $40K

December 4, 2023

December has kicked off with a bang as Bitcoin has surged past the psychological level of $40,000 – a price level not seen since mid-April 2022. 

Driven by significant exchange withdrawals and Federal Reserve Chair Jerome Powell’s cautious stance on interest rates, could this year’s ‘Santa rally’ be starting early? 

Elsewhere, MicroStrategy strengthened its Bitcoin commitment with another $593 million purchase, and the Bitcoin ETF race saw an unexpected late entrant.

There’s lots to uncover in this week’s round-up so let’s get started. 

Bitcoin soars above $41,000 amidst significant exchange withdrawals

Bitcoin has kicked December off with a bang pushing past the psychological level of $40,000 overnight, and many are attributing the move to a lack of BTC supply.

Statistics from Glassnode reveal that more than 37,000 BTC, valued at approximately $1.4 billion, has flowed out of exchanges since November 17. 

This substantial outflow is interpreted as a shift towards a long-term holding strategy and has been attributed as a possible cause for Bitcoin’s upward price movement. 

Bitcoin withdrawals from centralized exchanges are usually inversely correlated to prices
Bitcoin withdrawals from centralized exchanges are usually inversely correlated to prices

Historically, significant withdrawals from centralized exchanges have often preceded local price lows, reinforcing expectations of a medium-term price surge. 

Bitcoin’s recent ascent above the $38,800 mark early Friday had already led to broader gains in the cryptocurrency market, with some major tokens experiencing up to a 5% increase for the week – including ETH, which is now trading above $2200 for the first time since May 2022.

The total market capitalization of all cryptos has now also reached $1.5 trillion, marking a substantial $400 billion addition since the beginning of October. 

Alongside restricted supply, analysts also speculate that anticipated interest rate cuts by central banks in the coming months could attract more capital to markets, potentially resulting in increased volatility in speculative markets like cryptocurrencies.

Bitcoin’s 20-month high undeterred by Fed Powell’s Speech

The surge in Bitcoin’s price last week coincided with Federal Reserve Chair Jerome Powell’s appearance at Spelman College in Atlanta, Georgia, where he addressed the current economic landscape.

Powell, while adopting a cautious tone, emphasized the Federal Open Market Committee’s commitment to reducing inflation to 2% over time. 

He stated, “The FOMC is strongly committed to bringing inflation down to 2% over time and to keeping policy restrictive until we’re confident that inflation is on a path to that objective.” 

Powell further asserted that it would be premature to confidently conclude that a sufficiently restrictive stance had been achieved or to speculate on the timing of any policy easing.

Despite Powell’s cautious stance, his comments appeared to bolster sentiment in risk assets last week. 

Coupled with the outpouring from exchanges, the cryptocurrency market witnessed a surge as Bitcoin bulls successfully overcame key resistance at $38,000 on Friday. 

The surge in price was particularly notable given the anticipation surrounding the upcoming meeting of the FOMC in mid-December. 

Market expectations, as indicated by CME Group’s FedWatch Tool on December 4, continue to favor a pause in interest rate hikes.

Fed target rate probabilities chart 
Fed target rate probabilities chart 

MicroStrategy boosts holdings with another $593 million purchase

In another resolute display of commitment to the world of cryptocurrency, MicroStrategy, a prominent business intelligence and software company, has made a substantial investment in Bitcoin yet again. 

Founder & Chairman Michael Saylor revealed on Thursday that the company has acquired an additional 16,130 BTC, amounting to a total expenditure of $593.3 million. 

A strategic move that is unfolding amidst a positive surge in Bitcoin’s value.

MicroStrategy stepped into the Bitcoin arena back in August 2020, making waves with a noteworthy initial investment of $250 million in BTC. 

Since that pivotal moment, the company has remained unwavering in its commitment, consistently augmenting its Bitcoin holdings. 

This concerted effort has birthed a treasury reserve strategy that now boasts an impressive tally of over 174,530 bitcoins, valued at a staggering $6.59 billion at the current market rate.

According to MicroStrategy’s official statement, released on November 30, 2023, the recent acquisition of 16,130 bitcoins transpired between November 1, 2023, and November 29, 2023.

The company, along with its subsidiaries, utilized approximately $593.3 million in cash for this purpose, securing the bitcoins at an average price of around $36,785 per unit, inclusive of associated fees and expenses. 

With the impending fourth Bitcoin halving and strong signals of the SEC’s approval for the first spot Bitcoin ETF, MicroStrategy shows no signs of slowing down its aggressive Bitcoin investment strategy. 

Tweet from Michael Saylor outlining MicroStrategy’s most recent BTC purchase
Tweet from Michael Saylor outlining MicroStrategy’s most recent BTC purchase

Bitcoin ETF race gets unexpected 13th entrant

In an unexpected move, Swiss asset manager Pando Asset has joined the competitive race for a spot Bitcoin exchange-traded fund in the United States, becoming the 13th applicant in the running.

The move comes as several prominent ETF applications are approaching the final decision deadline.

Pando Asset submitted a Form S-1 to the U.S. Securities and Exchange Commission on Nov. 29, seeking approval for the Pando Asset Spot Bitcoin Trust. 

Much like its competitors, the trust aims to mirror Bitcoin’s price movements, relying on the custody services of Coinbase to hold Bitcoin on behalf of the trust.

This unexpected entry into the ETF race has raised eyebrows, with Bloomberg ETF analyst Eric Balchunas expressing more questions than answers about Pando’s late filing. 

Balchunas, in a Nov. 29 X post, pondered the implications if Pando’s ETF were to be approved on Jan. 10, a date he and fellow analyst James Seyffart predict as a potential approval day for all spot Bitcoin ETFs.

The 13th contender joins the ranks of major players such as BlackRock, ARK Invest, and Grayscale, all vying for SEC approval. 

Balchunas, however, remains skeptical about the readiness of Pando’s ETF to launch simultaneously with others on the speculated approval day but acknowledges that unforeseen developments are not unprecedented in the crypto space.

During the same week, investment giant BlackRock engaged with the SEC on Nov. 28, presenting an updated ETF model based on the regulator’s feedback. 

The revision focuses on addressing concerns raised during a prior meeting regarding the impact on balance sheets and potential risks to U.S. broker-dealers dealing with offshore crypto entities.

BlackRock’s proposal involves a modification to its redemption model, aiming to alleviate SEC concerns. 

Tweet from @Washigorira announcing Pando Asset ETF filing
Tweet from @Washigorira announcing Pando Asset ETF filing

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