Driven not only by BTC ETF earnings, but by macro factors, Bitcoin rose to $72K.
Between April 6 and April 8, Bitcoin (BTC) surged 7.6% to an entry high of $72,747 and sparked widespread speculation about its underlying causes.
While some may point to the rush into the space of Bitcoin exchange-traded funds (ETFs) as the main reason, this perspective looks at the broader motivations that are driving buyers to push the price higher. It is even more plausible that various macroeconomic factors played a key role in Bitcoin's recent price rally.
Is Ethena Stablecoin Behind Bitcoin's Rise To $72,000?
The rise in the price of BTC appears to be skewed only because Bitcoin bought $500 million in Athena stablecoin USDCe as collateral. For example, MicroStrategy's acquisition of 9,245 bitcoins worth more than $600 million on March 19 did not result in a 13.7% decline in BTC price over the next six days. With Bitcoin's daily spot volume of more than $10 billion, such revenue is relatively insignificant.
Investors' expectations regarding the economy and the cost of capital should not be underestimated. Liquidity and monetary policies designed to stimulate consumption and growth often use less assets.
JPMorgan Chase CEO Jamie Dimon said in a letter to shareholders that the U.S. economy's resiliency is “increasing inflation and markets may be higher than expected,” according to Yahoo Finance. This perception helps partly explain why gold ETFs are trading at higher prices in China, as investors brace for inflation amid the U.S.'s worrisome fiscal debt situation.
Eric Balkunhas, senior ETF analyst at Bloomberg, said Chinese investors are “very keen to buy assets unlinked to their own economy/stock market,” causing gold ETFs to trade at 30% above their fair value in China. The U.S. government's deficit has heightened concerns about fiscal sustainability with the March 23 approval of a $1.2 trillion spending package and President Joe Biden's proposal to forgive up to $20,000 in student debt for 23 million borrowers, regardless of income.
Should Bitcoin react positively to economic downturns?
It can be argued that the aforementioned volatility does not inherently favor Bitcoin, as higher inflation reduces the disposable income of the population and an inexorable increase in the US debt could lead to an economic collapse. Nevertheless, predicting how investors will react to such events remains challenging, given Bitcoin's volatile relationship with traditional assets such as stocks and gold.
Moreover, the escalation of the trade dispute between the US and China may stimulate an increase in demand for both gold and Bitcoin. Remarkably, gold prices rose to $2,354 on April 8, a development that pushed the 2-year U.S. Treasury yield to a four-month high of 4.79 percent. Typically, gold prices tend to decline as investors opt for yield from fixed income investments. However, this trend has not been evident in recent developments.
Related: Bitcoin ‘highly unlikely' to revisit 50k price level, says analyst
On April 8, US Treasury Secretary Janet Yellen revealed that the administration is considering possible tariffs on subsidized Chinese energy products, including solar panels, lithium-ion batteries and electric vehicles. Yellen also indicated that other countries may consider implementing trade restrictions on China, as reported by CNBC.
In this context, Bitcoin's rise to $72,000 on April 8 could be attributed to investors looking for a hedge against deteriorating global economic relations and US government stimulus initiatives, rather than being driven by intermittent and unpredictable Bitcoin revenues. Certain investors.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
