Bitcoin’s Potential Path to $40K

If the current market bullish momentum continues Bitcoin price may reach $40 K in 2023.

Rising open interest and excess demand are pushing the Bitcoin price up.

The investors’ risk-on and risk-off behaviour affect the value of bitcoin.

Keywords: Bitcoin price, buy Bitcoin, bitcoin whales, bitcoin traders, trade bitcoin, sell bitcoin, bitcoin investors, invest in bitcoin, bitcoin trading

Introduction

The prices of most major cryptocurrencies have experienced ups and downs during the year. However, in general, the cryptocurrencies have maintained steady upward price increases.

Currently, the crypto market expects the prices of major cryptocurrencies like bitcoin, ETH, Binance Coin and Solana to rise further. As of now, the bitcoin price is heading towards the $40 K mark.

This analysis looks at bitcoin’s short term and long-term outlooks as well as its possible trajectory towards the $40 K price level. We will also cover the factors that affect bitcoin’s price momentum during November and the remainder of the year. Finally, we shall uate the correlations between global economic factors and bitcoin performance.
Bitcoin’s Short-term and Long-term Price Targets

On 8 November, bitcoin reached a new 18-month high of $37,980 after breaching the $37.3k key resistance level. If the number one cryptocurrency keeps the upward momentum it can attain new multi-month highs during the month.

After reaching the $37,980 mark on Wednesday, bitcoin’s next target is $40K. Nonetheless, it is important to emphasize that currently bitcoin has experienced a minor retracement as it is trading at $36,478 as the following table shows.

Bitcoin Price Movement – CoinGecko

The diagram above indicates that the bitcoin price has been gradually increasing since 24 October. Specifically, it reached $37,883 on 9 November before retracing to $36,401 later in the day.

It is likely that bitcoin may remain bullish for the remainder of 2023, a reason why some analysts believe that it may reach or surpass $40 K. Bitcoin Square, a crypto analyst, quoted Markus Thielen as saying, “Bitcoin will reach $40,000 – if not even $45,000 – by the year’s end.”

Both bitcoin positioning on the market and the dovish Federal Reserve’s recent stance are likely to drive the bitcoin price higher. Already, the prices of most cryptocurrencies including bitcoin have increased by over 40% within the last 6 weeks.

The recent bitcoin price surge has resulted in an increase in the demand for call options which give the purchasers the right to buy bitcoin at a predetermined value. The rise in these bullish bets has left market participants like market makers exposed to continued price rises. As a result, they buy bitcoin to hedge against any losses.

As the bitcoin price continues to rise towards $40K the market participants who trade options will continue to buy more BTC in a bid to force its price up. Since there are options that will expire on 24 and 29 November there is much interest to push the bitcoin price to $40 K.

According to CoinGlass, the current bitcoin futures open interest (OI) have a total value of over $17 billion, the highest since mid-April. When the open interest increases it means that more liquidity is being channelled towards bitcoin. On the other hand, a decrease means that many positions are being closed.

The current bitcoin open interest means that there is much momentum to push its value up. Considering that we only have two key resistance levels, $37.3k and $40K, before reaching the price target it is possible that BTC may breach them in coming days or weeks since the option interest has increased by more than 51% within the last month.

The other factor that is enticing bitcoin whales and traders to buy more BTC is the current bullish market sentiment. Generally, the crypto market is bullish due to the anticipation of the SEC’s bitcoin ETF approval. As a result of the market’s bullish outlook 82% of the wallets that hold BTC are “in the money” and are willing to hold their coins.

However, according to Finbold, there is a chance that the bitcoin traders who are “In the Money or at a breakeven position” may sell their coins once the bitcoin price reaches $40K. High selling pressure at that level may push the bitcoin price down once again. Nonetheless, the BTC investors are only likely to sell bitcoin if the market turns bearish.

Also, the Relative Strength Index (RSI) indicator has been hovering in the overbought zone for a long time. This indicates that the bitcoin market is highly bullish. Nevertheless, a retracement may signal market rejection which may force the bitcoin price closer to the $34K-$35K zone.

Data from IntoTheBlock suggests that the supply of bitcoin is greater than its demand, a reason why its price keeps on rising. For example the aggregate order book data from 20 crypto exchanges shows that there are 55,000 orders to buy bitcoin and 43,000 up for sale. The following graph contains the information.

Bitcoin (BTC) Aggregate Exchange Order Books - IntoTheBlock

Basically, if the buy orders are more than the sell orders it means that the buying pressure in the crypto market is high. As a result, bitcoin buyers will need to slightly increase their bids in order to get their orders filled as quickly as possible.

How Economic Turbulence Affects Bitcoin’s Trajectory?

Probably, the greatest factor that has been affecting the price of bitcoin is the Federal funds rate. The Federal Reserve has maintained its interest rate above 5% to curb inflation. That means there has been less capital inflows into risky assets like bitcoin. As a result, since 2022 the demand for cryptocurrencies has been relatively low.

Some countries have been experiencing economic downturns. For example, the Chinese export decreased by 6.4% from its 2022 levels. In Germany industrial production dropped by 1.4% on the year-on-year basis. Generally, low production leads to less investment in risky assets than otherwise.

However, the United States’ shift in economic policy from tightening to liquidity easing has resulted in a rise in demand for cryptocurrencies. Therefore, more crypto investors have started to invest in bitcoin, thereby increasing its demand. Generally, bitcoin trading, as evidenced by rising volume, has resulted in its price surge.

Correlations between Economic Factors and Bitcoin Performance

Over time major cryptocurrencies, especially bitcoin and ETH, have shown both risk-on and risk-off behaviour. With risk-on behaviour bitcoin traders, for example, take higher risks during periods of economic boom in pursuit of higher returns. They do so because they have high disposable income during such periods.

When the economic conditions are not favourable bitcoin investors show risk-off behaviour as they avoid high risk investments and preserve their funds. This means that during periods of harsh economic conditions like recessions bitcoin traders do not invest much in the coin. Instead, they may sell bitcoin to generate funds to invest in less riskier products like stocks and commodities.

Also, it seems that there is a correlation between inflation and the price of bitcoin. During periods of high inflation many investors buy and hold bitcoin. They aim to store the value of their money in bitcoin since they believe that it is a hedge against inflation. This results in a constant increase in its value.

Conclusion

There are several indications that the bitcoin price may reach $40 K during the current year. The increase in open interest and excess demand for the coin seems to create a bullish momentum in the market. On the other hand, rising interest rates in the United States tend to pull the bitcoin price down.