Bitcoin (BTC) price is up today, topping $44,000 for the first time in over 19 months. The rally highlights traders’ continued bullish bias for Bitcoin, which produced the best November performance since 2020. 

The most likely catalyst for Bitcoin’s rally to $44,000 is the markets’ belief that a spot BTC exchange-traded fund (ETF) will be approved in January 2024 and this is bringing significant cash inflows from institutional investors.

Now that BTC has notched its best monthly close in 19 months, let’s look into the reasons why Bitcoin price is up today.

Centralized exchange volumes return to norm

Initially, Bitcoin price flashed mixed signals after former Binance CEO Changpeng “CZ” Zhao’s guilty plea and the exchange agreed to pay a $4.3 billion settlement to the U.S. Department of Justice (DOJ) on Nov. 21. After taking some time to digest the outcome, the market began to notice that Binance exchange was not having a mass exodus of funds like FTX did when its liquidity crisis first became public. Leaders in the crypto market, like Galaxy Digital CEO Mike Novogratz, see the settlement as a net positive overall.

While initially, Binance’s Bitcoin reserves were down 17% from their all-time high, the exchange is starting to see BTC inflows again. Since the initial outflows, Binance’s Bitcoin balance is up nearly 1%. By comparison, FTX BTC reserves were depleted by 99.9% from the all-time high when the exchange experienced a run on the bank in November 2022 and never recovered. Research for on-chain analytics firm Nansen concluded that it is back to normal business for the largest crypto exchange, Binance.

While Binance’s Bitcoin reserves are their lowest since March 15, they maintain the largest amount of BTC compared to other centralized exchanges. New CEO Richard Teng contends that Binance is now totally different.

The lack of a major exodus from Binance is coupled with all exchanges experiencing multi-year lows in Bitcoin deposits. The number of Bitcoin deposited to exchanges is typically viewed closely as a high number of deposits may mean increased selling. Bitcoin deposits per day have not been this low since July 2020.

Potential spot BTC ETF approval boosts market sentiment

Despite a bevy of macro headwinds, Bitcoin price continues to push higher, achieving a 163.2% year-to-date gain with volatility increasing. Some Bitcoin analysts believe the Binance and DOJ settlement is bullish for spot Bitcoin ETF approval, noting a similar deal achieved by Arthur Hayes and BitMEX.

While some analysts believe the Bitcoin price is up due to whales, BTC has more than doubled the 2023 returns of both gold and the United States dollar.

The current positive sentiment around Bitcoin led the BTC market cap to surpass Berkshire Hathaway, making it the 10th-biggest asset by that measure. Despite BTC’s strength, the Securities and Exchange Commission (SEC) has refused to approve a spot Bitcoin ETF despite numerous applicants, including BlackRock, Fidelity, ARK Invest and 21Shares, with new players seemingly entering weekly. BlackRock reported on Dec. 5 receiving $100,000 in seed funding for its spot Bitcoin ETF.

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According to reports, an approval may generate $600 billion in new demand. CryptoQuant analysts believe that an ETF approval will lead to a $1 trillion increase in Bitcoin’s market capitalization.

Galaxy Digital predicts a 74% price increase in the first year after a spot BTC ETF launch. The next window for the SEC to potentially approve a spot Bitcoin ETF is Jan. 5 through Jan. 10.

Now official. https://t.co/NONkklEJq2 pic.twitter.com/V2Q2L3u5o9

— Scott Johnsson (@SGJohnsson) December 1, 2023

Institutional investor inflows total .8 billion year-to-date

While some investors may be awaiting increased liquidity from a spot ETF approval, institutional investors have already begun deploying funds to Bitcoin and crypto. According to CoinShares, institutional investors have pushed $1.76 billion into crypto in the past year.

Related: Bitcoin bulls charge to $44K as week-to-date BTC price gains pass 10%

Of the $1.76 billion pushed to crypto assets last year, over $1.68 billion has flowed to Bitcoin specifically. In the past week, $132.8 million of institutional inflow was for Bitcoin alone.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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