Bitcoin (BTC) rose 10% between July 25 and July 29, coming close to the $70,000 resistance level. Despite an initial failed attempt to push Bitcoin’s price down to $68,000, investor sentiment is a far cry from three weeks ago, when Bitcoin was trading below $55,000.
Improved regulatory perspectives and a weak economy are favorable for Bitcoin.
Some market participants claim that the main driving force behind the recent rally is political support from the leading candidates in the US presidential election. Others claim that demand for Bitcoin is driven by fears of an impending recession.
Solo Ceesay, CEO and co-founder of Calaxy Web3 Wallet, argues that the economy is in bad shape, with credit card defaults at a 12-year high and new home inventory surpassing its 2008 peak. Solo’s article doesn’t predict a near-term crisis hitting the market, but notes that 2025 will be “bumpy” because “in most places, even $100,000 won’t be enough to support a family, feed them, and house them.”
Even if the recession doesn’t have an immediate impact on consumers and the job market, investors are concerned that the stock market may have peaked, as the U.S. Federal Reserve is likely to cut interest rates in the near future. Some analysts point to the 20% decline in tech giant Nvidia from its June all-time high as evidence that the AI hype is showing early signs of slowing down. Investors are increasingly losing confidence in the technology sector’s ability to grow.
At the same time, the economy began to weaken after McDonald’s reported lower-than-expected sales and earnings. The leading global fast-food restaurant chain experienced a 0.7% same-store sales decline in the United States, its first negative figure in four years. Likewise, Heineken shares plunged 10% after a quarterly net loss of $103 million and weak beer sales growth.
Trader and economist Alex Kruger offers a different explanation for the sudden shift in investors’ view toward Bitcoin. According to Kruger, “Bitcoin has now become a political issue,” meaning that candidates are trying to gain political support from the cryptocurrency industry. But the economist goes a step further, saying that “by November, politics will be the most important price driver.”
It would be misleading to say that the current US administration or candidate Kamala Harris has endorsed Bitcoin or declared support for the cryptocurrency industry. Harris’s team’s efforts to build a more constructive dialogue follow a July 26 letter from the Democratic leader and candidate urging the party to change its “hostility” toward the cryptocurrency industry.
The sudden interest in Harris’s camp comes in the wake of growing support for her rival, Republican candidate and former President Donald Trump, who delivered a keynote speech at the Bitcoin 2024 conference on July 27, emphasizing his constructive view of the industry. Regardless of the intentions behind the recent improvements in regulation, the view is far more constructive.
Related: Record $39.4 billion in Bitcoin open interest signals imminent price breakout
Bitcoin Miners Saw Bullish Signs After Initial Concerns About Selloff
Finally, Bitcoin’s estimated mining processing power reached an all-time high of 667 terahashes per second on July 26, effectively putting to rest concerns raised by the April halving, which cut incentives in half to 3.125 BTC per block.
Initially, this move pushed some inefficient miners off the network, causing Bitcoin’s hashrate to drop 16% on July 1, its lowest level since February.
Traders had feared a ‘death spiral’ as miners would sell their holdings due to declining profitability and the negative pressure on the BTC price would further drive participants out of the market. However, the latest surge in the hash rate indicator reflects miners’ long-term commitment and confidence in the Bitcoin price.
Given the improved conditions in the Bitcoin mining industry, better regulatory prospects, and Bitcoin’s ability to act as a hedge against fiat currency depreciation resulting from a recession, the odds of a new all-time high in the near term are increasing.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.