Bitcoin recently broke away from a weak stock market, speculating that the leading cryptocurrency will attract those in need of a haven or inflation hedge.
Since September 29, Bitcoin has risen more than 20% and is currently trading above $ 50,200, while the S&P 500, Wall Street’s benchmark stock index, is down 2.6% to 4,300. Bitcoin’s current positive price action is in stark contrast to earlier corrections of the year, which often coincided with declines of 2% or more in the S&P 500.
BTC price 4-hour chart | Source: Tradingview
Industry experts say Bitcoin’s recent resilience stems from its fascination with its store of value character, institutions continue to invest in the crypto market, and speculate that the US will soon approve Bitcoin Exchange Traded Funds (ETFs) based on current seasonally active and futures contracts.
Inflation hedge
Carlos Betancourt, co-founder of BKCoin Capital, said:
“Inflation has not stopped yet and every household is seeing the prices of goods and services soar across the country. Many savvy investors look for asymmetrical opportunities and hedge against inflation. There is always a common asset that comes to mind … Remember, Bitcoin is the only asset that cannot be tampered with by a government or central bank. “
A recent survey by the New York Federal Reserve showed that expected inflation rose to 5.2% in August for the 10th straight month for the next year.
Expected inflation | The source: Federal Reserve Bank of New York
Bitcoin is attractive as a store of value thanks to programming code that cuts the mining reward known as halving in half. In particular, supply expansion is reduced by 50% every 4 years, in stark contrast to the Fed’s unlimited money printing. Several companies, including MicroStrategy listed on the Nasdaq, have used Bitcoin as an asset to maintain the value of their coffers.
Marcie Terman, COO of crypto hedge fund Panxora Group, said both upward pressures in the global economy and uncertainty about the US debt ceiling are negative for stocks, but positive for Bitcoin because “people use crypto as an inflation hedge (much like gold ). “.
Stocks have come under pressure in the past few weeks amid fears the Fed will cut incentives to control inflation and debt ceilings more quickly.
Max Boonen, founder of crypto market maker B2C2, commented:
“Inflation concerns are fueling predictions about the Fed’s future interest rate path. That could put pressure on stocks as usual. On the other hand, Bitcoin is considered more inflation-resistant than stocks because of its fixed supply. “
current Organization money
Institutions and venture capital firms are pouring money into the crypto ecosystem and there is no sign of even slowing the recent downtrend.
Shiliang Tang, chief investment officer of the crypto mutual fund LedgerPrime, said in a Telegram chat:
“There is usually a lot of money going into the ecosystem in the first few months of a new quarter. So the funds it took to get capital into work, which helped in this case. Some of the funds we spoke to saw very strong inflows this quarter. Data from ByteTree Asset Management shows that EU, Canadian ETFs, as well as US and Canadian closed-end funds, have accumulated over 3,000 bitcoins in the past 4 weeks.
According to Jeff Dorman, Chief Investment Officer at Arca Funds, Bitcoin and the broader crypto market were “primarily driven by uncontrollable capital flows through venture capital, hedge funds and direct purchases through Fidelity, Coinbase and others” earlier in the month.
“Ask an OTC digital asset trader or a liquid digital asset fund manager, all of them will point to significant and continuous monthly inflows.” Dorman To write in his weekly research notes.
According to data from research firm PitchBook, crypto companies raised a record $ 7.5 billion in July-September, surpassing the previous record increase of $ 7 billion in the first quarter.
Seasonality
Some investors buy cryptocurrencies with the expectation that the last 3 months of the year will bring a stronger rally, as has often been the case in the past.
The seasonal chart above shows that September is usually the worst month of the year, while October and Q4 are generally the strongest months.
Betancourt from BKCoin says:
“Seasonality can, to a certain extent, be a self-fulfilling prophecy. However, especially when it comes to cryptocurrencies, the recent flow of news is definitely the main driver in the historical charts. “
Panxora’s Terman says that seasonal effects can have some impact. However, they are not reliable.
“Since we viewed BTC as a viable market as of 2013, there were only 8 data points to make this prediction. That is too little data to make a reasonable assessment. “
ETF forecasts
Optimism that the US Securities and Exchange Commission will soon approve a futures-based ETF also seems to be driving the market higher.
“Canada has officially approved a crypto ETF that includes both Bitcoin and ETH. U.S. SEC chairman Gary Gensler recently expressed support for a Bitcoin futures-based ETF, and this is sure to be seen as an optimistic sign by investors. The SEC is examining more than 20 ETF applications and ETF products related to BTC and ETH, ”said Betancourt.
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