Bitcoin rebounded strong today and rose more than 4% to above $81,000 as US spot Bitcoin exchange-traded funds (ETFs) and Strategy attracted more interest in the market. Investors were also wondering if US monetary policy should be relaxed after comments from Federal Reserve Governor Christopher Waller.
Bitcoin was trading at $81,000, up about $4,000, after rising from a high near $77,000 yesterday and the world’s largest cryptocurrency. Uncertainty of the economy and monetary policy expectations have motivated financial markets to rise in recent days, and lower expectations of a Fed rate increase in the future for risk assets like Bitcoin and other cryptocurrencies.
One of the factors of the recent Bitcoin surge is the demand of US spot Bitcoin ETFs. US spot Bitcoin ETFs attracted $277 million in provisional inflows on Thursday, according to CoinDesk. Though the inflows have not yet established a long and consistent streak, the positive flow had further support for Bitcoin from the $81,000 level.
ETF demand is becoming an increasingly influential indicator for cryptocurrency investors as these are the investment products which give traditional investors the easiest way to get exposure to Bitcoin. The continued flows of funds indicate to investors that despite some volatility you are still willing to hold or increase a long-term exposure to the currency so long as you keep your money in the money market and not just look a single day at the top of the list. But analysts will be watching for the last few days’ inflows to come up and see if a single day’s figure is indicative of a long-term trend.
For the rally, another factor is that Strategy has resumed buying stocks, the company with a huge Bitcoin stash. Crypto stocks also benefited from the market rally. Strategy's shares rose very much in the latest rally and Coinbase and other cryptocurrency-related firms also rallied significantly.
Macroeconomic expectations have provided an additional boost. Investors have started to temper expectations of a September Fed rate increase after Waller said he might support keeping rates stable if inflation slows. That changed the outlook for rates and helped boost broader risk assets to higher levels and helped drive new interest in cryptocurrency.
Much lower expectations for interest rate hikes are supportive for the likes of Bitcoin because when financial conditions look less restrictive, investors may feel better able to invest in more volatile assets. At the same time, cryptocurrency prices are highly sensitive to inflation, interest rates, bond yields and the US dollar.
The latest rally has also enhanced Bitcoin's technical picture. Reuters said Bitcoin had recently moved above several important moving averages following a strong recovery. But analysts have identified resistance around the $81,000-$82,000 region, and maintaining momentum above this region could be critical to determine whether the recent recovery turns into a longer-term improvement.
Market observers note the $83,000 area also will be watched closely. The move beyond crucial resistance points along with the market could boost sentiment with a clear rise above certain important resistance levels and a failure to hold on to recent gains could trigger a period of consolidation or a move in the direction of a decline in momentum or a move in and out of the market and potentially lead to a correction to be a big one. Technical indicators are also showing signs of an acceleration of momentum and the pace of the market could be too high and a market may be able to go very much more than just a little wild on either side.
The rally has not just been for Bitcoin. A number of other big cryptocurrencies have been rising as well. Ethereum, BNB, XRP and Dogecoin all rallied, with Dogecoin rising significantly. Zcash was the best performing one, rising significantly over the course of the period. The overall trend indicates a general sentiment towards digital assets that is far from being focused on the largest cryptocurrency.
But despite the good news, analysts are reluctant to declare a new long-term bull market. The recent rise is huge but Bitcoin's weekly performance is still relatively low (as you can see) and Bitcoin prices can move quickly in the short term. The success of this latest rally has been in many ways driven by ETF flows, macroeconomic news and market positioning so long as long-term and long-term trends of the stock market will not be too slow to catch up.
Now Bitcoin is above $81,000, so that is a significant recovery for the cryptocurrency market. ETF demand, corporate buying and changing expectations about Fed policy make the cryptocurrency market more supportive. But what the next stage of trading will determine if Bitcoin will hold up and break through key resistance points?
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