Bitcoin (BTC) rose 6% on July 26, approaching the $68,000 resistance level. Interestingly, this move coincided with increased buying pressure on US Treasuries, with US 5-year yields falling to their lowest levels since March 2024. Similarly, gold, considered the world’s largest reserve asset, rose 1.4% on July 26, approaching $2,400.
Bitcoin’s rally may seem counterintuitive given investors’ increased interest in bonds and gold, but the answer lies in the performance of tech stocks and real estate markets.
Bitcoin price rises as stock market rally stalls and real estate data slumps
Part of the increased demand for Treasury bonds can be attributed to the U.S. personal consumption expenditures (PCE) price index, which rose 2.5% year-over-year in May, in line with analysts’ expectations. The report, released on July 26, indicated that personal income rose 0.2% month-over-month, slightly below market expectations of 0.4%. In short, the data favored a rate cut by the U.S. Federal Reserve.
A shift to less restrictive monetary policy is usually detrimental to fixed income markets and gold, but on July 26, the opposite happened. Investors are concerned that stock markets are headed for a correction, making alternative assets like Bitcoin more attractive. There are also growing concerns that real estate market data is weak as high borrowing costs keep sellers from putting their properties on the market.
Mike Wilson, Morgan Stanley’s chief investment officer, told Yahoo Finance on July 26 that the S&P 500 could fall 10% in the third quarter as “AI optimism” and “weakening economic growth” create “cracks” in the bullish thesis. Wilson added that the government is spending too much on fiscal policy to “keep things moving,” creating a bearish backdrop for stocks.
According to Keith Lerner, Truist’s co-chief investment officer, Yahoo Finance reports that tech has led the recent market decline, partly because of the U.S. government’s plans to ban exports of key technologies for artificial intelligence development, and partly because of profit-taking. The tech sector has outperformed the S&P 500 by the most since 2002 for two straight months.
In the real estate market, the number of unsold new homes in the South rose to an 18-year high, led by Florida and Texas. In June, there were 293,000 new homes available for sale in the South, surpassing the previous record of 291,000 set in August 2006. “These markets are in the process of finding new liquidation prices to clear excess inventory,” PulteGroup CEO Ryan Marshall told Yahoo Finance.
Related: Bitcoin rebounds to $67,000 ahead of Trump’s Nashville speech
Investors are starting to favor the ‘digital gold’ theory of Bitcoin.
Amidst expectations of a correction in stock market indices in some parts of the market, the main factor behind Bitcoin’s momentum is probably the recent buying spree by pension funds.
In May, details emerged that the Wisconsin Investment Board was investing $164 million in a spot Bitcoin exchange-traded fund (ETF). On July 25, Jersey City Mayor Steven Fulop announced plans for the city’s pension fund to invest in a spot Bitcoin ETF. Also on July 26, a U.S. Securities and Exchange Commission filing revealed that the Michigan State Pension System holds $6.6 million in a spot Bitcoin ETF.
Essentially, the perception of Bitcoin is changing from a risky asset that typically falls when a recession negatively impacts real estate and stock markets to something closer to gold, an alternative hedge against ever-increasing money printing and unsustainable fiscal government debt.
There is no guarantee that Bitcoin will break its current all-time high of $73,757 in 2024, but it is becoming increasingly likely.
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.