Bitcoin surged to US$57,860 and was hovering around US$57,000  — a level not seen since May — during morning trading hours in Asia on Oct. 12, according to CoinGecko data. Bitcoin is currently about 10% away from its all-time high of US$64,804.

Factors driving Bitcoin’s current surge

Last month, Bitcoin fell to around US$41,000 following China’s latest bans on cryptocurrency trading and mining, which saw Chinese cryptocurrency exchange Huobi, one of the largest in the world by trading volume, announce that it would stop serving users in mainland China by the end of the year.

Market watchers told Forkast.News that several factors are driving Bitcoin’s latest resurgence.

Bitcoin’s 30% rally this month kicked off after comments from Fed Chairman Jerome Powell that he has “no intention” of following China’s lead and banning cryptocurrencies, said Tony Sycamore, City Index’s senior market analyst for APAC. “Powell’s comments provided the green light for continued innovation and development of blockchain technology under a regulatory environment that fosters rather than stifles growth.”

Mounting speculation that the U.S. Securities and Exchange Commission (SEC) could approve a Bitcoin Futures ETF in the near future following recent encouraging comments from SEC Chair Gary Gensler has also led to increased optimism over Bitcoin.

“The prospect of a Bitcoin Futures ETF that will likely bring further demand for the underlying Bitcoin asset is prompting traders to rotate out of Ethereum and other altcoins in favor of Bitcoin,” Sycamore said. An indication of this was that the Bitcoin dominance ratio — which measures Bitcoin’s market capitalization relative to the total crypto capitalization — had increased to 46% from 40% a month ago, Sycamore added.

Last week, Bitcoin investment products saw inflows of US$225 million, which constituted 99% of the total inflows into digital asset products, according to digital assets fund manager CoinShares. “We believe the turnaround in sentiment towards Bitcoin is due to constructive statements from SEC chair Gary Gensler, potentially allowing a Bitcoin ETF in the U.S.,” wrote CoinShares investment strategist James Butterfill.

According to CoinShares, crypto investment products saw inflows of US$226 million last week — the eighth consecutive week of inflows — with total crypto assets under management at US$67 billion, just 5% short of the all-time high due to recent positive price action.

The United States’ recent decision to raise its debt ceiling has also reinforced Bitcoin’s narrative. “It’s something that’s happening in the macro space where the U.S. is essentially giving itself a blank check or the ability to take on more debt,” Justin d’Anethan, head of exchange sales at Nasdaq-listed crypto company EQONEX, told Forkast.News. “The value of Bitcoin as a decentralized, programmatically scarce asset is even more important now than it was before.”

Bitcoin’s upside potential

D’Anethan sees the cyclical nature of Bitcoin playing out with Bitcoin leading the way, with altcoins playing catch up. “Over time, I do think altcoins will perform relatively well and that they’ll just follow Bitcoin and if not, actually outperform.”

On-chain activity also paints a bullish picture for Bitcoin. The supply of Bitcoin held by long-term holders hit a new all-time high, according to Glassnode data. “That’s very supportive because that means people with strong hands, people who are not looking to exit the space, are growing,” d’Anethan said. “That indicates that there’s upside potential.”

While there could be volatility and corrective price action for Bitcoin in the very short term, market watchers are bullish on Bitcoin’s momentum heading into the last quarter of 2021.

“Just a year and a half ago people were wondering if we’d ever cross the 20K mark so just being where we are at now feels great,” d’Anethan said. “There’s a lot of bullishness, and we can definitely go back to the all-time high and breach it.”

City Index’s Sycamore also predicts that Bitcoin will retest its all-time US$65,00 high into year-end, and pullbacks are likely to be well supported.

“Crypto tends to perform well in Q4. If we see continual risk with the equity market, we could possibly see a new high from Bitcoin and also the rest of the coins,” said Danny Chong, co-founder of Tranchess, a yield-enhancing asset tracker. The options market indicates the huge interest for Bitcoin upside — a signal for a possible new high for Bitcoin, Chong added.

“The adoption by mainstream financial institutions and even big corporates is accelerating and that definitely is a positive sign of how things are going,” Chong said.