Bitcoin, three tailwinds | CoinDesk JAPAN | Coin Desk Japan

Directional traders who have been betting on the rise of Bitcoin (BTC) have been disappointed over the past two months. Bitcoin has fallen more than 16% since reaching a high of $31,000 two months ago.

Still, it’s up nearly 60% since the start of the year, a great performance compared to the 38% rise in the tech-focused Nasdaq. Given the macroeconomic conditions and other strong tailwinds, the path of least resistance may be in the direction of higher prices.

Weaker dollar and lower bond market volatility

The Dollar Index (DXY), which reflects the value of the US dollar against major currencies, fell 1.2% last week to 102.30, its third straight week of declines. The continued decline erased the 50%-plus gains that had weighed on the cryptocurrency in the previous three weeks.

“The weaker dollar is good for Bitcoin, which means that the strongest gains for Bitcoin and risk assets to date have been during DXY bear markets,” notes cryptocurrency intelligence firm Jarvis Labs.

“With the Fed holding off on rate hikes (and inflation easing), the dollar index won’t stay above 100 for long.” (Jarvis Labs)

The Fed last week decided to keep interest rates between 5% and 5.25%. It paused a 15-month hike in rates that has pushed the dollar higher and roiled risk assets since last year. The Fed remains open to raising rates again in the future, but analysts question whether it will actually do so.

“The reason I don’t think rate hikes will resume is because inflation is responding. Slowly but surely, it’s paying off, and increasing interest rate risk is finally starting to address the damage from commercial real estate loans. , it just puts an unnecessary burden on an already fragile banking system,” said CoinDesk columnist Noelle Acheson.

On the other hand, the volatility of US Treasuries (market) is rapidly declining. This often leads to increased risk taking in financial markets.

The Treasury Market Options Volatility Index, calculated by ICE (Intercontinental Exchange) and Bank of America Merrill Lynch, shows the future volatility risk of government bonds, according to data from charting platform TradingView. fell nearly 10% last week to its lowest level since February.

Nice tailwinds building for #BTC

USD weakening and now joined by lower USDCNH

Nice reversal in US yields yesterday

Volatility skew and positioning to the downside

Large drop in RRP providing liquidity

China easing

Climbing the wall of worry

— David Brickell (@davidbrickell80) June 16, 2023

“Bitcoin has a good tailwind
USD fell, now joined by USDCNG (US Dollar/Offshore Renminbi)
US Treasury Yields Reversed Yesterday
Volatility is on the decline
RRP (reverse repo) offering liquidity has dropped significantly
Chinese mitigation policy
(The market is) climbing the wall of worry.”

* “Climbing the Wall of Worry” is an idiom that expresses the emergence of a bullish trend despite uncertainties.

blackrock ETF

BlackRock, the world’s largest asset manager, filed for approval last week for a Bitcoin spot ETF (exchange-traded fund). It’s a pleasant surprise for a market that has been battered by bad news for the past 12 months.

Ken Odeluga of CF Benchmarks, a crypto indexer, said that BlackRock’s proposed fund will continue to attract institutional investors in bitcoin-based products, even after last year’s terrible bear market. As it can be seen that the interest from the public remains strong, he said:

“With this fund, BlackRock believes that investor demand for bitcoin is broad enough to enable a mainstream bitcoin product in the convenient and familiar form of a regulated exchange-traded fund. (By the way, BlackRock plans to use the CF Benchmarks bitcoin reference rate)

Shown below is when GLD launched, allowing easy access to Gold exposure for investors.

If/when Blackrock’s (who has a 99% ETF approval) Bitcoin ETF launches (very similar structure to GLD), expect similar price action as it unlocks access to Bitcoin exposure for the masses. pic.twitter.com/Bzhn5enI5G

—Will Clemente (@WClementeIII) June 18, 2023

“The chart below is from the launch of GLD (SPDR Gold Shares ETF), which made it easy for investors to gain exposure to gold.

Once BlackRock’s (99% ETF approval rate to date) Bitcoin ETF (which is very similar in structure to GLD) launches, it will pave the way for Bitcoin exposure to more people. price movement is expected

The U.S. Securities and Exchange Commission (SEC) has previously rejected multiple spot ETF applications, citing concerns about Bitcoin price manipulation. BlackRock’s application includes a surveillance sharing agreement that could eliminate the risk of market manipulation, and the application may be approved.

Some experts believe BlackRock’s filing is a message to SEC Chairman Gensler that the company, led by prominent Democratic supporter Larry Fink, supports the SEC’s anti-crypto stance. I think it means that they do not. Others, of course, see it as a pure application for approval.

“Either way, it’s a very welcome positive move and puts pressure on the SEC for more clarity than just ‘go to the SEC and register. “The political battle over the future role of the United States is intensifying, but far from over,” said Acheson.

Demand for safe havens

In early June, the SEC sued major crypto exchanges Binance and Coinbase for offering multiple crypto assets as unregistered securities. Bitcoin and Ethereum (ETH) were not mentioned in the complaint.

“Regulatory risk is mainly focused on altcoin investors, with limited impact on those who only hold BTC and ETH,” said Matt Hu of crypto manager Blofin. The CEO pointed out and continued:

“However, if the SEC wins the lawsuit, all altcoins may be considered securities and need to be regulated by securities standards. In addition, liquidity will be more concentrated in major crypto assets such as BTC, ETH, etc.”

Bitcoin dominance has broken out of a three-year pattern, indicating that investors are shifting their money from altcoins to bitcoin.

Crypto analyst The DeFi Investor also took to Twitter to point out that Bitcoin may continue to outperform altcoins given its growing dominance.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Image: Shutterstock
｜Original: Bitcoin Could Benefit From These 3 Bullish Tailwinds