Bitcoin (BTC) is up 2% over the past 24 hours, recovering after two days of struggling to break the $61,500 resistance level. The current uptrend could hold the price level above $62,500, meaning Bitcoin could still experience positive price action regardless of US spot Bitcoin ETF flows, which saw net outflows of $100 million in four days. It shows.
Sentiment toward cryptocurrencies improved following China’s announcement that it would issue $138 million in long-term bonds to boost its economy. This was expected after the announcement in March, but it reaffirms that the government recognizes the increased risk of recession. This was in response to data showing China’s total credit declined in April for the first time in seven years.
Zou Wang, investment director at Shanghai Anfang Private Fund Management, told Reuters that markets were currently expecting the Chinese central bank to inject additional liquidity, including by cutting interest rates. said. The move will further exacerbate problems after recent expansionary action by the U.S. Federal Reserve caused the U.S. money supply to increase in March for the first time in two years.
At first glance, injecting more money into the economy may seem beneficial, but over time it can lead to higher inflation. This is especially because businesses and individuals may delay spending and investment. As bond investors begin to realize that their returns rarely keep pace with rising inflation, scarce assets like Bitcoin may become more attractive.
Ultimately, investors are likely bracing for a continued trend that will require governments to continue providing liquidity to prevent economic crises. While some might argue that the stock market will primarily benefit from this added liquidity, higher interest rates have a negative impact on businesses by increasing their cost of capital. Any debt issued in the last 16 years will have a much higher interest rate when refinanced.
According to Yahoo Finance, Federal Reserve officials last week hinted that interest rates could remain elevated for an extended period of time. In particular, Minneapolis Fed Chairman Neel Kashkari said, “I think it’s much more likely that we’ll be sitting here longer than we expected,” and Chicago Fed Chairman Austan Goolsbee said, “Now we’ll just wait.” The drive to increase liquidity is carefully designed to delay inflationary pressures.
Essentially, the U.S. central bank’s actions are intended to encourage more borrowing by businesses and individuals to support employment and consumer markets. But what the Fed can’t predict is how much of this borrowed money will be used for underfunded assets to hedge against inflation rather than stimulate the economy. Although it is believed to be too early to fully assess those risks, Bitcoin investors remain skeptical about the Fed’s chances of a soft landing.
Related: Japanese listed company adds Bitcoin as reserve asset with 117 BTC.
Additionally, on May 13, Bitcoin’s value was influenced by unexpected factors. It was the return of social media influencer “Roaring Kitty,” a former marketer who played a pivotal role in the 2021 GameStop (GME) stock rally. Not active in X. After nearly three years on the social network, the Bitcoin community seems to be hoping to get some form of incredible impact from this personality.
Cryptocurrency investors expect sentiment toward digital assets to turn positive amid growing distrust of banks and traditional finance, especially in light of recent government bailouts, including that of Philadelphia-based Republic First Bank. These investors believe that these developments could attract more participants to cryptocurrencies.
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.