Bitcoin, which has doubled in price this year, is poised to break through $40,000. Is it just a matter of time?

As 2023 draws to a close, whether Bitcoin, which has doubled in price, can break through $40,000 has become the most pressing question for many cryptocurrency speculators.

According to Zhitong App, the largest digital asset has rebounded by about 130% in the past 11 months since the cryptocurrency crash in 2022, outperforming investments such as stocks or gold. The hope for a rate cut by the Federal Reserve next year and the expectation of the approval of the first spot Bitcoin ETF in the United States have sparked strong optimism in the market.

Bitcoin's recent rally has come despite increased regulatory scrutiny of the cryptocurrency industry in the United States, such as the imprisonment of Sam Bankman-Fried for fraud at FTX. For optimists, the efforts to curb suspicious practices in the industry and the recent surge in ETF applications indicate that the cryptocurrency industry is maturing and may be adopted more widely.

Fiona Cincotta, Senior Financial Market Analyst at City Index Ltd., said, "To reach $40,000, all we need is the approval of a spot Bitcoin ETF." She added that Bitcoin has recently lost some upward momentum, partly because investors have been drawn to the significant volatility in stocks and the foreign exchange market.

Bloomberg Intelligence expects a batch of US spot Bitcoin ETFs to be approved by the US Securities and Exchange Commission (SEC) before January next year. While a repositioning of rate bets or unexpected disruptions in ETFs could undermine Bitcoin's rally, market sentiment remains optimistic for now.

MicroStrategy (MSTR.US), the publicly traded company with the largest Bitcoin holdings globally, bought another $593 million worth of Bitcoin last month, bringing its total to about $6.5 billion. Michael Novogratz, founder of Galaxy Digital Holdings Ltd., said on Wednesday that Bitcoin could reach a peak of nearly $69,000 in a year, similar to its peak in 2021.

Technical Analysis

From a technical perspective, Bitcoin's weekly Relative Strength Index (RSI) closed above 75 last week. Although a reading above 70 is considered an "overbought" signal, the situation may not be that simple. Over the past decade, after the weekly RSI exceeded 75, the token has averaged a 15% increase in the following month, which would push it well above $40,000.

However, the Moving Average Convergence Divergence (MACD) indicator, which attempts to capture the underlying momentum of an asset's trend, shows a weakening trend in Bitcoin's recent performance, with the indicator's reading in negative territory based on the span of the histogram. At the same time, Bitcoin has also struggled to break through $38,000 recently. According to Tony Sycamore, a market analyst at IG Australia Pty, Bitcoin has made multiple attempts to break through $38,000. However, "each breakout has failed. Nevertheless, I do believe that Bitcoin is likely to surpass $40,000, either after the ETF announcement or as risk assets recover before the end of the year."

Options Situation

In terms of the options market, data from Deribit indicates that the position of Bitcoin options suggests a high probability of the token fluctuating between $37,000 and $40,000 in December. Given that traders who sell bullish options with a strike price of $40,000 are clearly willing to accept bets from the other side, this indicates that this level will be a key testing area for Bitcoin's recovery.