Bitcoin hits new highs since the beginning of the year ──Are expectations too high in the wave of TradFi entry?[bitbank monthly report]

The Bitcoin (BTC) exchange rate against the dollar in June has been steady since the middle of the month, recovering to the $30,000 level for the first time in two months.

The Bitcoin market recovered to $28,000 with the resolution of the U.S. debt ceiling problem at the end of May. On June 5th, the US Securities and Exchange Commission (SEC) filed a lawsuit against Binance and CEO CZ, causing the market to close below $26,000 for the first time in three months.

The next day, Coinbase, a major US crypto asset (virtual currency) exchange, was also sued by the SEC. However, after that, the selling of altcoins spread, and the top price of Bitcoin was pressured, and Robinhood, worried about the lawsuit from the SEC, decided to abolish Cardano (ADA), Solana (SOL), and Polygon (MATIC). Announced, Bitcoin fell below $26,000 again.

Furthermore, when the economic outlook of the US Federal Open Market Committee (FOMC) in June indicated the possibility of two rate hikes remaining in the year, Bitcoin performed a further decline after passing the meeting, and at one point reached $25,000. also interrupted.

On the other hand, Bitcoin stopped declining around the milestone of $25,000 and avoided falling below the same level. Then, BlackRock, a major US asset management company, submitted a listing application for a spot-type Bitcoin Exchange Traded Fund (ETF) to the SEC, and the market rebounded. Furthermore, while WisdomTree and Invesco have also submitted physical Bitcoin ETF listing applications following BlackRock, traditional financial institutions such as EDX Markets, a US exchange backed by Fidelity and Charles Schwab, have started their services. (TradFi) big players entered the market one after another, and Bitcoin recovered to $28,000.

Bitcoin’s recovery did not stop there, and on the 21st, in the congressional testimony of Powell, chairman of the US Federal Reserve System (FRB), there was a statement that acknowledged the sustainability of virtual currency as an asset class, and the market price jumped to 30,000. After recovering around the dollar, on the 23rd, the SEC approved the Volatility Shares leveraged bitcoin futures ETF for listing, and the price slightly improved from the year-to-date high reached on April 14th.

Bitcoin vs. dollar daily chart (created by Glassnode/bitbank)

Recently, Bitcoin’s “TradFi entry market”, which was triggered by BlackRock’s spot-type Bitcoin ETF application, has slowed down, and Fidelity is also preparing to apply for a spot-type Bitcoin ETF on the 27th. According to reports, the price is facing resistance around $31,000. The bitcoin market has recovered from the decline of the last two months in just one week, but combined with the feeling of shortness of buying and technical overheating, the price is in a high price struggle.

If the first spot-based bitcoin ETF in the United States were to be approved, it would have a large impact on the market, but if the flow of news related to ETFs ceases, it is undeniable that the current trend may not continue.

On the other hand, US Treasury yields, which are inversely correlated with Bitcoin, have recently leveled off both the benchmark 10-year yield and the 2-year yield, which is sensitive to monetary policy trends, and the market is expected to reach the end of the year indicated by the FOMC. We are trying to ascertain whether there will be two interest rate hikes and the timing of the start of rate cuts.

In his testimony to Congress in June, Chairman Powell said that the remaining two interest rate hikes would be contingent on economic growth as expected. While there are some signs of economic stagnation, such as an increase in the number of new unemployment insurance applications and a decline in the service industry Purchasing Managers’ Index (PMI), solid consumer spending and the housing market were confirmed in June. With the core consumer price index (CPI) remaining high, it would not be strange for the FRB to resume raising interest rates again in July.

Based on the above, the Bitcoin market in July is expected to struggle to hit new highs. The possibility of a major collapse in the market over whether the Fed will raise interest rates is considered low as the market has already factored in the probability of an interest rate hike of more than 70%. We would also like to consider price adjustments to around $29,000, where the lows of 2021 will be concentrated.

｜Editing: Takayuki Masuda
| Image: bitbank

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