Bitcoin Could Reach A Local Top At $48K As Traders 'Buy The Rumor, Sell The Fact'

Bitcoin, the world's largest crypto asset by market capitalization, continues to soar to new heights. As it breaks through the $44,000 price level, a seasoned portfolio manager forecasts that BTC's local top would be around $48,000 in the short term.

The term "buy the rumor, sell the fact" refers to a trading strategy where traders purchase a stock or crypto asset based on speculations about an upcoming announcement and then sell the asset as soon as the news is made public.

Over the past weeks, Bitcoin continued to rally, pushing its value up on the anticipation that the U.S. Securities and Exchange Commission (SEC) would soon announce the country's first-ever spot Bitcoin exchange-traded fund (ETF).

While BlackRock and other Wall Street giants lined up to get their ETF prospectuses approved by the regulator, Bitcoin, in which the highly awaited crypto investment vehicle is based, has seen a significant surge in its value for every positive news related to the applications.

This week, the "king of crypto" broke through different price levels, including the $44,000 threshold on Tuesday, which is a new all-time high this year.

"The rally comes as traders' bullish view for Bitcoin produced the best November performance since 2020. After the Binance and DOJ settlement, there is hype around the market's belief that a spot BTC exchange-traded fund (ETF) would be approved in January 2024 and that the ETF will bring significant cash inflows to Bitcoin, thus pushing prices across the crypto market higher," Mathieu Ziaei, portfolio manager and risk officer at Switzerland-based digital asset investment manager Criptonite Asset Management told International Business Times.

"My personal opinion is that traders are going to front-run the ETF with the current price action of Bitcoin. I think that around $48,000 should be the local top for Bitcoin on the short term. It's been a long time since the planets have been aligned this perfectly. With the ETF hype, end of the financial cycle and most of the risks have been eliminated, this leaves room for Bitcoin to rally freely," Ziaei added.

The executive is also optimistic that investors would succumb to higher-risk investing given the current scenario.

"With rumors of 'financial easing,' which typically involves measures taken by central banks or governments to stimulate economic activity by lowering interest rates or implementing other monetary policies. This should encourage investors to take higher risks while investing," Ziaei told IBT.

He believes maintaining a short position in the current market would be risky.

"Entering or maintaining a short position (someone expecting prices to fall) at this time could be precarious given the observed shift in market dynamics. Any trader or fund manager who has been holding a short position in digital assets since the beginning of the year would not be in a good position, especially in Bitcoin. How would you explain it to your management that you are holding a short? I would find it hard for anyone to justify having a short position on Bitcoin now with all the positive news," he explained.

"Traders have been stunned by FTX, Luna and Three Arrows, leading to increased apprehension about adopting long positions. However, these unforeseen events, often referred to as Black Swans, have acted as a cleansing force within the crypto industry, creating more bearish sentiment compared to previous times. It is anticipated that this sentiment may reverse once even more euphoria kicks in, likely driven by the approval of a spot Bitcoin ETF in the U.S., but there is also a high probability that we see a classic 'buy the rumor, sell the fact' move in early 2024 leading to a sharp move to the downside," he added.

Bitcoin briefly enjoyed trading in the $44,000 level earlier and was trading in the green zone at $43,964.08 at 6:00 a.m. ET on Wednesday, with a 24-hour trading volume up by 17.58% at $$38,781,928,940.

Its price action represented a 5.48% spike in the past 24 hours and a 14.8% gain over the last seven days.

Data from CoinMarketCap showed that BTC's circulating supply stands at 19,562,400 BTC, with its value continuously climbing by 5.51% at a market cap of $861,352,535,531.