Bitcoin (BTC) hit a new all-time high last Saturday, March 13th, with a passage of over $ 61,680. However, BTC was unable to maintain levels above $ 60,000 for the rest of the week. It briefly fell below $ 54,000 on Tuesday and has since rebounded to nearly $ 58,000 at press time.
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Government bond yields are rising, interest rates remain low
A number of analysts attribute the brief increase over USD 60,000 to the adoption of the so-called “American Rescue Plan” on March 10th. The bill included plans to distribute around $ 1.9 trillion of stimulus payments across the US economy. Federal Reserve officials have said they expect interest rates to stay near zero through at least 2024. Both of these factors have raised concerns that USD inflation is in the relatively near future.
According to Coindesk, the inflation worries were triggered by a sharp increase in the yield on 10-year Treasury bills. For the first time since January 2020, two months before the start of the pandemic, this value was above 1.75%. While higher long-term US Treasury bond yields can signal an increase in investor confidence, they can also be a sign of concerns about rising inflation.
Capital markets across the board appear to reflect such concerns. With 10-year Treasury note yields reaching their highest level in over a year, Bitcoin wasn’t the only asset to lose steam.
The Financial Times reported yesterday, “The tech-heavy Nasdaq Composite closed the day 3 percent lower, its worst day in four weeks.” Bloomberg reported that oil prices “slumped” 8 percent as “stocks fell from record highs”.
In addition, government bonds maturing in 30 years showed signs of change on Thursday. Your return rose by 0.05 percentage points to a total of 2.47 percent, the highest level since January 2020.
After a meeting of the Federal Open Market Committee on Wednesday, Federal Reserve Chairman Jerome Powell said there was no need to fight rising government bond yields.
“The attitude of monetary policy [that] We have what we think is appropriate today, ”said Powell. “We believe our assets in their current form, on the other side of the curve, are buying $ 80 billion in government bonds and $ 40 billion in net mortgage-backed securities. We believe this is the right place to make our asset purchases. “
Bitcoin as a “hedge against inflation”
Still, Powell’s words do not seem to allay concerns about the rising tide of possible inflation.
While Bitcoin surged above $ 60,000 last week, expectations of what the American Rescue Act’s incentive would do on the price of BTC seem to have fallen somewhat flat. Finally, Bitcoin is increasingly being referred to as a “hedge against inflation”. Shouldn’t it be better than ever?
According to CoinDesk, Bitcoin is at the center of two opposing forces.
On the one hand, there are investors who believe that Bitcoin is a means of preserving capital in the face of USD inflation. On the flip side, there are investors who still view BTC as a risky investment. As government bond yields have been higher in recent weeks, some analysts believe investors are more likely to choose these over riskier assets like Bitcoin.
“The Stimulus Law” drugged “the crypto market.”
However, a number of analysts believe that it is only a matter of time before stimulus cash finds its way into bitcoin, especially if the world’s central banks continue to pump the markets with stimulus cash.
Giacomo Arcaro, a well-known “growth hacker”, investor and crypto entrepreneur, told Finance Magnates that “the economic bill has” drugged “the crypto market.
“There was an increase, but it was temporary: it shortened the path to $ 60,000, and I expect we’ll be back to $ 60,000 very soon and steadily,” said Arcaro.
Arcaro firmly believes in Bitcoin as a hedge against inflation. “We’re talking about $ 1.9 trillion,” he said. He believes that: “It is obvious that there has to be some kind of inflation, and if there is inflation, the only way not to lose money is to invest in gold or” crypto gold “and this means Bitcoin or Ethereum. “
Aaron Rafferty, CEO of the decentralized financial fund RF Capital, told Finance Magnates that the incentive “had a strong impact on the Bitcoin and crypto markets as a whole, but it’s not this big one-time event that some people are expecting.”
“People get their checks in staggered publications at different banks. The result of this is smaller pumps, like the one on March 17, with bitcoin and various assets pumping 10% daily when 90 million Americans received their incentive. “
“The price of a stimulus check of $ 1200 received on April 15, 2020 would be worth $ 10,400 as of March 17, 2021 if it were invested in Bitcoin. With that in mind, imagine these gains will continue to propel the market into the summer as more and more people try to invest their checks in more speculative assets. It won’t be the overnight sensation people think of, however. “
“The explosiveness of institutional interest in this space is currently unprecedented.”
Indeed, Bitcoin’s short-term journey could see a few more ups and downs before seeing significant momentum of over $ 60,000.
Matt Blom, Head of Sales and Trading at the EQUOS cryptocurrency exchange, told CoinDesk: “US $ 57,400 remains our focus.”
“Should Bitcoin stay above this level, the bulls will be happy to explore and push prices higher, targeting $ 60,780,” he wrote. However, if you don’t cross this point, Bitcoin could soar to just $ 53,360.
All in all, $ 53,000 might not be such a bad thing, after all, less than a month ago, $ 53,000 was Bitcoin’s all-time high. In addition, some analysts believe that the institutional buying of Bitcoin is on the verge of a turning point.
“The explosiveness of institutional interest in this area is currently unprecedented,” wrote market analyst and investor Joseph Young on Twitter. Young was referring to news originally reported by Asiae in South Korea and published on Naver News on Friday March 19. Morgan Stanley is said to be bidding for Bithumb. Bithumb is South Korea’s largest crypto and bitcoin exchange valued at around $ 2 billion.
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Morgan Stanley reportedly offers a $ 2 billion valuation for Bithumb, South Korea’s top crypto and bitcoin exchange.
Slowly, then sure.
The explosiveness of institutional interest in this area is currently unprecedented.
– Joseph Young (@iamjosephyoung) March 19, 2021
Investors with “strong hands” have bought BTC from sellers with “weak hands”
In addition, Bitcoin analyst Willy Woo wrote on Twitter that since March 2020 there has been a “steep and sustained” supply shock for Bitcoin “synchronously” [with] USD Money Printing “since March 2020.
According to Woo, this is reflected in an increase in “speculative inventory on exchanges”. In fact, the amount has been used up fairly consistently over the past 12 months. In other words, the amount of BTC held in exchange accounts has been relatively small, an indication that BTC hodlers have no plans to sell their coins anytime soon.
Woo also believes that the amount of Bitcoin held on exchanges has steadily decreased, and the amount of Bitcoin held “by speculative” weak hands “has decreased. In other words, investors who are more likely to sell their Bitcoin have actually sold it. However, the “strong hand” investors who bought Bitcoin are much less likely to sell it in the future.
Woo believes that “US institutions and high net worth individuals (HNWI) are drawing the available coins from weak hands and locking them up as strong HODLers in response to monetary inflation,” he said. He pointed to the “Coinbase BTC supply falling off a cliff” as evidence of US institutional buying activity.
A story of 3 charts …
As of March 2020, #Bitcoin is experiencing a strong and sustained supply shock synchronized with USD money pressures.
1) The speculative inventory on the stock exchanges is exhausted. pic.twitter.com/4IkK9t2Weu
– Willy Woo (@woonomic) March 19, 2021
“That is of course insanely bullish,” he wrote. “Strong hands have bought every slump that has driven prices up sharply since the fourth quarter of 2020.”
An important year ahead of us
Some analysts agree that as Bitcoin has continued to grow, it will play an increasingly important role worldwide.
@DocumentingBTC, a Twitter account that posts key historical events in the Bitcoin lifecycle, posted a tweet comparing two Reuters headlines headed “#Bitcoin has entered the geopolitical phase”.
#Bitcoin has entered the geopolitical phase. pic.twitter.com/2RUaitSueV
– Documentation from Bitcoin @ (@DocumentingBTC) March 18, 2021
The first two headlines in question “India Proposes Cryptocurrency Ban, Punishes Miners, Traders;” the other: “The Pakistani province plans to build pilot cryptocurrency mining farms.”
It remains to be seen whether India’s upcoming cryptocurrency regulations will be enough to constitute a “ban”. However, the tweet seemed to imply that a new geopolitical divide could be forming between nations that accept Bitcoin and the cryptocurrency economy and those that don’t.
Of course, digital currencies are likely to play an important role in the future of the global economy, even if they only manifest as government-issued central bank digital currencies (CBDCs).
In the United States, Powell has declared research into a so-called “digital dollar” a “high priority project”. Speaking to the House Financial Services Committee on February 24, Powell said 2021 will be “an important year” for the Federal Reserve’s digital currency creation. Stay tuned.