Bitcoin ($BTC) is back on the green side of its charts, surging past the $46,000 mark early Friday. In doing so, it reached a one-month high for the first time since 12 January.
This significant rally helped the digital currency to climb 7% in just two days. Interestingly, it coincided with the beginning of the Chinese New Year celebrations.
This East Asian event is traditionally associated with increased market activity and optimism.
The surge in Bitcoin’s value is not isolated, as it also aligned with the S&P 500 hitting a record high on 7 February. This suggested a broader trend of investors seeking refuge from inflation in both traditional and digital asset markets.
New year, new highs
The Chinese New Year is often seen as an auspicious time for investments. It has now added a layer of cultural momentum to Bitcoin’s appeal.
The year 2024 is marked as the Year of the Dragon in Chinese culture. The dragon symbolises strength, luck, and prosperity, qualities eagerly sought by investors.
The similarity between the Mandarin words for ‘dragon’ and ‘long’ has not gone unnoticed among traders, lending a memetic boost to the cryptocurrency’s bullish run.
This alignment of cultural symbolism with trading sentiment has provided an additional layer of optimism for Bitcoin’s prospects in the new lunar year.
Analysts are now eyeing a potential rise to $48,000, buoyed by historical patterns of gains around this festive period.
This optimism is also part of a larger trend, with Bitcoin gaining nearly 15% over the past two weeks. This was amid record-breaking performances in major stock indices like the S&P 500 and Nasdaq-100.
Despite initial scepticism surrounding the launch of Bitcoin exchange-traded funds (ETFs), the market has shown remarkable resilience, with other factors also playing a significant role in the current rally.
Beyond the festivities
The backdrop to Bitcoin’s recent surge includes critical economic indicators and market dynamics. The United States’ national debt has reached a historic high of $34.2 trillion, prompting discussions about the sustainability of such fiscal paths.
With the Federal Reserve’s interest rates at 5.25%, there’s a strong incentive to reduce rates throughout 2024. This could potentially drive investors towards stocks and commodities as alternatives to fixed-income investments.
The Congressional Budget Office’s projections of a soaring US budget deficit and rising public debt ratios add to the pressure on traditional financial systems. This, in turn, makes scarce assets like Bitcoin increasingly attractive.
Moreover, US consumer debt delinquency rates have hit a 12-year high, signalling potential trouble for the economy and banking sector.
This uncertain macroeconomic landscape has partly fueled Bitcoin’s rally. However, the sustainability of this new price level remains to be seen.
Observers like Laurent Ksiss of CEC Capital caution that a breach of $45,000 could lead to profit-taking and a potential reversal. However, others remain bullish, with LMAX Digital suggesting that Bitcoin could be eyeing a push to fresh yearly highs above $50,000.
Bitcoin’s surge beyond $45,000 has also led to a significant shake-up in the market, with $115 million in short positions liquidated in just 24 hours. While catching leveraged traders by surprise, this volatility also reflects the intense market dynamics as Bitcoin’s price climbs.
However, despite concerns over market volatility, the digital currency’s recent performance has bolstered trader confidence, showcasing the underlying strength of its market fundamentals.
At the time of press, the top coin changed hands for $46,669, up by almost 5% daily and 8.6% weekly. Technical indicators were noted in the bullish region too, with both the Awesome Oscillator (AO) and Moving Average Convergence/Divergence (MACD) emanating green histograms above their respective half-lines.
However, volatility could be on the high as the Bollinger Bands were seen widening and moving away from each other.