Bitcoin experienced a 5.9% increase from June 2 to 5, reaching a peak at $71,746 before its rally was halted. This surge was bolstered by almost $1 billion flowing into spot Bitcoin exchange-traded funds (ETFs) in the United States, showcasing a strong demand from institutional investors.
The positive momentum of Bitcoin was further supported by the notable growth in unrealized losses within the U.S. banking sector. Despite favorable conditions such as a friendlier approach to cryptocurrencies from U.S. lawmakers, Bitcoin (BTC) struggled to surpass the $72,000 mark.
Uncertainty surrounding regulations remains despite some positive advancements. Matt Hougan, the chief investment officer at Bitwise, believes that regulatory ambiguity has prevented financial advisors from increasing their exposure to cryptocurrencies. However, Hougan is optimistic about the U.S. moving towards regulatory clarity, especially after the Democrats voted to repeal the U.S. Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121.
The approval of spot Ether (ETH) ETFs by the SEC indicates a shift in U.S. regulators’ stance on cryptocurrencies, following several legal defeats, including Grayscale’s Bitcoin Trust conversion into a standard ETF. Nevertheless, Hougan points out that President Joe Biden’s veto of the SAB 121 repeal highlights that the crypto industry still has a long road ahead.
A recent report from the Federal Deposit Insurance Corporation (FDIC) revealed that U.S. financial institutions are facing $517 billion in accounting losses due to higher rates affecting their residential mortgage-backed securities. The report, published on May 29, also mentioned that 64 banks were on the verge of insolvency in the first quarter of 2024.
Arthur Hayes, co-founder of BitMEX, suggested that a potential solution to economic challenges would involve “printing more money,” a scenario that could benefit assets like Bitcoin. Hayes attributed Bitcoin’s 43% surge over 30 days starting in March 2023 to the failures of Silicon Valley Bank and Silvergate Bank, hinting at a similar outcome in 2024.
However, Hayes acknowledged that if the Federal Reserve intervenes to prevent widespread bankruptcies through liquidity injections or special credit lines, Bitcoin’s price might initially drop if the stock and bond markets face turmoil.
Looking back at Bitcoin’s rally in March 2023, the price dropped to $19,559 before surging, reflecting the uncertainty that also led to a decline in the U.S. two-year Treasury yield. Investors may anticipate a correction in Bitcoin’s price before another rally, especially given the consistent inflows into U.S. spot Bitcoin ETFs, totaling over $52 billion since its debut in January.
Despite the recent success of the stock market, particularly U.S. tech stocks like NVidia, which propelled the S&P 500 index to new highs, there is a possibility that the performance of traditional assets could overshadow interest in Bitcoin. The strong performance of GameStop, influenced by social media and influencers, could divert traders’ attention away from cryptocurrencies.
In conclusion, while Bitcoin may have the potential to reach new all-time highs in 2024, the comfort of investors with traditional assets like fixed-income securities and stocks could limit its immediate growth beyond $71,000.
This article serves as general information and should not be construed as legal or investment advice. The opinions expressed are solely those of the author and do not necessarily reflect the views of Cointelegraph.