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According to one market observer, the anticipated pre-halving rally presents an opportunity for short-term profit-taking.

The current euphoric sentiment, coupled with institutional demand and the historical pattern of gains associated with bitcoin’s halving event, suggests that the cryptocurrency is poised to surpass its previous all-time high of $69,000 in March, as suggested by some traders.

Bitcoin halving events have historically triggered bull rallies, with prices surging by several hundred percent in the months following previous halvings. These events occur approximately every four years and result in a reduction of block rewards for miners. The next halving is expected in mid-April, according to a countdown clock.

As the supply of new bitcoins on the market decreases, prices tend to rise, provided that demand remains stable or increases. While past price movements may not necessarily repeat in the future, the anticipation of a rally often prompts investors to make significant bets on the asset.

Bryan Legend, CEO of Hectic Labs, explained that investor expectations of a supply reduction driving up prices, combined with a pre-halving rally, contribute to a renewed bullish sentiment in the market. However, Legend also noted that the rally leading up to the halving event presents an opportune time for realizing short-term gains.

Meanwhile, some traders anticipate bitcoin surpassing its previous peak of $69,000 in March, citing strong institutional demand and the early success of spot bitcoin exchange-traded funds (ETFs).

Ryan Lee, chief analyst at Bitget Research, pointed out that with 54 days remaining before the bitcoin halving and expectations of an interest rate cut by the Fed later in the year, bitcoin prices have a support level around $50,000 and could fluctuate to reach historical highs in March. Lee highlighted the record trading volume of nine bitcoin ETFs in the U.S., indicating strong institutional bullish sentiment.

On Tuesday, Bitcoin ETFs collectively traded $2 billion, with BlackRock’s IBIT recording over $1.3 billion in daily trading volume for the second consecutive day.

As of Wednesday’s Asian morning hours, Bitcoin was trading slightly above $57,200, marking a 1.5% increase over the past 24 hours. The CD20, a broad-based index, has also seen nearly a 1% increase.

Bitcoin surged to $60,000, marking its highest value in over two years, driven by growing optimism that interest in the cryptocurrency is broadening beyond its core enthusiast base.

The cryptocurrency’s value has already soared more than 40% since the beginning of the year, propelled partly by the successful introduction of US exchange-traded funds (ETFs) holding Bitcoin. These ETFs have attracted over $6 billion in investments since their launch on January 11. Bitcoin last reached $60,000 in November 2021, following its peak near $69,000 earlier that same month.

“It’s quite astonishing,” remarked Ryan Kim, head of derivatives at digital-asset prime brokerage FalconX.

An upcoming reduction in Bitcoin’s supply growth, known as the halving, is contributing to the positive sentiment. This factor, coupled with an ongoing rally that has ignited speculative interest in various other tokens like Ether and Dogecoin, is fueling what some describe as a “fear of missing out” (FOMO) rally.

“We’re witnessing a clear FOMO-driven rally,” observed Zaheer Ebtikar, founder of crypto fund Split Capital. “More and more people are becoming convinced to invest.”

Bitcoin is on track for its most significant monthly gain since December 2020, when it surged 50% to around $9,600. Its value has more than tripled since the beginning of last year, rebounding from a steep 64% decline in 2022. This remarkable resurgence follows a period of skepticism fueled by scandals and bankruptcies within the crypto industry.

Despite expectations for tighter monetary policy, reflected in rising US Treasury yields, digital tokens like Bitcoin continue to rally. Bitcoin has outperformed traditional assets such as stocks and gold in 2024.

“This turnaround is particularly noteworthy given central banks’ indications of keeping rates elevated for some time, challenging the assumption that the next crypto bull run would be driven by falling interest rates,” noted Michael Safai, co-founder at quantitative trading firm Dexterity Capital.

The significant inflows into Bitcoin ETFs have raised concerns about a potential supply squeeze, as new coins from miners struggle to keep pace with demand. Approximately 80% of Bitcoin’s supply hasn’t changed hands in the past six months, intensifying the squeeze and adding upward pressure on prices, analysts suggest.

The nine new spot ETFs collectively hold more than 300,000 Bitcoin, seven times the amount of new coins mined since January 11. Following the halving, expected in late April, the daily output of new coins will decrease from 900 to 450. If demand remains steady while the supply of new coins halves, proponents anticipate further price increases.

“All these factors together create a supply and demand imbalance,” explained Dan Slavin, founder of Chainview Capital, a crypto hedge fund. “More demand than supply means higher prices, and in the volatile world of BTC, higher prices mean much more than just a 10% increase.”

In the European morning hours of Wednesday, Bitcoin (BTC) surged past the $59,000 mark, marking a 5% increase over the past 24 hours and hitting a market capitalization of $1.2 trillion.

This rise in price coincided with significant trading activity in spot bitcoin exchange-traded funds (ETFs), which saw over $3 billion in cumulative trading volumes on Tuesday, driving up demand.

Additionally, some traders attributed the surge to anticipation surrounding the upcoming bitcoin halving event expected in April, suggesting it as a new narrative driving a pre-halving rally.

According to data from Coinglass, futures bets predicting lower bitcoin prices faced $25 million in liquidations since the Asian morning hours, potentially contributing to the price hike.

Meanwhile, other major tokens like ether (ETH), Solana’s SOL, and XRP also saw gains of up to 3% since the Asian morning hours, as reported by CoinGecko.

On another front, the fear and greed index, a sentiment gauge tracking the rate of change in asset movement relative to underlying fundamentals, reached 82 on Wednesday – indicating extreme greed and hitting its highest level in over a year.

Rated on a scale of 0 to 100, with 0 representing extreme fear and 100 reflecting extreme greed, such a high level of greed often signals euphoria in the market, which, according to the index developers, suggests an impending correction.

Despite these indicators, traders seem undeterred, with some anticipating that bitcoin will surpass its previous highs of $69,000 in March.