Bitcoin saw a 5.9% increase in value from June 2 to 5, reaching a peak at $71,746 before facing resistance. This surge was bolstered by nearly $1 billion flowing into U.S.-based spot Bitcoin exchange-traded funds (ETFs), highlighting strong demand from institutional investors.
The positive momentum for Bitcoin was further fueled by the mounting unrealized losses within the U.S. banking sector. Despite favorable conditions and a more crypto-friendly stance from U.S. lawmakers, Bitcoin was unable to breach the $72,000 mark.
Uncertainty surrounding regulations continues to loom despite some positive developments. Matt Hougan, the chief investment officer at Bitwise, noted that financial advisers are hesitant to increase their exposure to cryptocurrencies due to this regulatory ambiguity. However, there is a shift towards regulatory clarity in the U.S., as seen with the Democrats voting 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 more favorable stance toward cryptocurrencies following several legal setbacks, including the conversion of Grayscale’s Bitcoin Trust into a traditional ETF. Yet, President Joe Biden’s veto of the SAB 121 repeal underscores that the crypto industry still has a long road ahead.
A recent report by the Federal Deposit Insurance Corporation (FDIC) revealed that U.S. financial institutions are grappling with $517 billion in accounting losses due to the impact of higher rates on residential mortgage-backed securities. This report, published on May 29, pointed out that 64 banks were on the verge of insolvency in the first quarter of 2024.
Arthur Hayes, the co-founder of BitMEX, suggested that the solution to economic challenges may lie in “printing more money,” a scenario that benefits scarce assets like Bitcoin. He highlighted how Bitcoin’s 43% surge over 30 days in March 2023 was triggered by the collapses of Silicon Valley Bank and Silvergate Bank, hinting at a similar pattern in 2024.
However, if the Federal Reserve injects liquidity into the financial system to prevent widespread bankruptcy or ease banking pressure through repurchase agreements and special credit lines, Bitcoin’s price could initially drop if the stock and bond markets face turmoil.
Before the rally in March 2023, Bitcoin’s price dipped to $19,559, the lowest in almost two months, reflecting the uncertainty that pushed the U.S. two-year Treasury yield from 5.07% to 3.98%. This unusual movement indicated traders’ willingness to sacrifice yield for the security of government-backed assets.
Investors may anticipate a price correction before another Bitcoin rally, although past trends do not guarantee a repeat, especially with consistent inflows into U.S. spot Bitcoin ETFs, totaling over $52 billion since their launch in January.
The performance of U.S.-listed tech stocks, such as NVidia, contributing to the all-time high of the S&P 500 index on June 5, could detract from interest in alternative assets like Bitcoin. A strong stock market and the recent surge in GameStop’s stock could divert traders’ attention away from cryptocurrencies.
While there are no apparent obstacles preventing Bitcoin from reaching a new all-time high in 2024, the comfort of investors in traditional markets may limit its immediate ascent beyond $71,000. This article serves as general information and should not be construed as legal or investment advice. The opinions expressed here are solely those of the author and do not necessarily represent those of Cointelegraph.
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