Bitcoin (BTC) rose 5.9% from June 2nd to 5th, but stopped at $71,746. The move was supported by nearly $1 billion worth of inflows into US-listed Bitcoin spot exchange-traded funds, indicating strong demand from institutional investors.
Bitcoin’s bullish momentum was also fueled by a significant increase in unrealized losses in the U.S. banking sector. But despite favorable conditions, including a more cryptocurrency-friendly stance from U.S. lawmakers, Bitcoin failed to surpass $72,000.
Regulatory uncertainty persists despite positive developments
Regulatory uncertainty has hindered financial advisors from increasing their exposure to cryptocurrencies, according to Matt Hougan, chief investment officer at Bitwise. Nonetheless, Hougan believes the U.S. is moving toward regulatory clarity. This is a change that began when Democrats voted to repeal Securities and Exchange Commission (SEC) Employee Accounting Disclosure 121.
The SEC’s approval of a spot Ethereum ETF is another sign that U.S. regulators are less inclined to pick on anti-crypto disputes after several court losses, including converting Grayscale’s GBTC Trust into a regular ETF. However, Bitwise’s Hougan points out that US President Joe Biden’s veto of the repeal of SAB 121 shows that “cryptocurrencies still have a long way to go.”
According to a report by the Federal Deposit Insurance Corporation (FDIC), U.S. financial institutions are currently suffering accounting losses of $517 billion due to the impact of high interest rates on mortgage-backed securities. According to a report released on May 29, 64 banks are at risk of bankruptcy in the first quarter of 2024.
Bitcoin prices may fall before negative macroeconomic events occur.
BitMEX co-founder Arthur Hayes argued that the most likely solution is to “print more money,” which would be extremely advantageous for scarce assets like Bitcoin. In Hayes’ view, Bitcoin’s 43% 30-day rally starting in March 2023 was triggered by the collapse of Silicon Valley Bank and Silvergate Bank. A similar pattern may appear in 2024.
But even if this theory is correct, meaning the U.S. Federal Reserve will inject liquidity into the system to avoid regular bankruptcies or ease pressure on the banking system through repurchase agreements and special credit lines, if the bit There is a possibility that the coin price will fall first. The stock and bond markets are experiencing difficulties.
Before the rally began in March 2023, the price of Bitcoin fell to $19,559, the lowest in nearly two months. At the time, the move reflected the same uncertainty that moved the U.S. two-year Treasury yield from 5.07% to 3.98%, which was extremely unusual and indicated that traders were willing to lower yields for the security of holding government-backed assets. .
As a result, investors can expect a price correction ahead of an eventual Bitcoin rally. However, there is no guarantee that the trend will be repeated in 2023, especially given the outstanding track record of repeated inflows (accumulating over $52 billion) of US spot Bitcoin ETFs. Since its launch last January.
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Stock market success is not inherently positive for Bitcoin.
One should also consider the outstanding performance of US-listed technology stocks, including NVidia (NVDA), whose S&P 500 index reached an intraday high of 5,342 on June 5. UBS analysts expect the Fed to cut interest rates twice. As CNBC reported, this year has created a “healthy backdrop for stocks.”
Even if they are not competing for the same money as Bitcoin, the strong performance of the stock market reduces the incentive for alternative assets. GameStop’s (GME) week-to-date 32% rise was sparked by ‘Roaring Kitty’ influencer and social network posts showing profits exceeding $85 million, which may have a negative impact on trader interest in the cryptocurrency. there is.
Simply put, there is nothing stopping Bitcoin from hitting new all-time highs in 2024. However, there is little incentive to rise above $71,000 in the near term as long as investors remain comfortable with fixed income and stock market traders.
This article is written for general information purposes and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.