Bitcoin (BTC) managed to maintain its position above $63,000 on April 26, despite facing various negative factors. These include significant outflows from spot Bitcoin exchange-traded funds (ETFs) over the past two days, increased regulatory scrutiny highlighted by an FBI warning against unregistered crypto services, and efforts by U.S. Senators to examine cryptocurrency transactions.
According to Farside Investors, spot Bitcoin ETFs in the U.S. experienced a net outflow of $218 million on April 25, following a previous outflow of $120 million the day before. Notably, Franklin Templeton was the only provider to see inflows on April 25, implying that the trend of withdrawals cannot solely be attributed to high fees at Grayscale GBTC.
On April 25, U.S. Senators Elizabeth Warren and Bill Cassidy wrote a letter to the U.S. Department of Justice and the Department of Homeland Security seeking details on measures being taken to address the issue of pseudonymity in cryptocurrency payments for child abuse material. The senators referred to a report from Chainalysis and emphasized the need for punishment for those involved in selling such illegal content.
Bitcoin bulls are finding hope in the deteriorating global macroeconomic conditions, particularly after the U.S. personal consumption expenditure (PCE) rose by 2.8% year-over-year in March. This increase in inflation, which exceeds the target set by the U.S. Federal Reserve (Fed), is especially concerning given that U.S. gross domestic product growth for the first quarter was lower than expected at 1.6%.
These figures reinforce market expectations that the Fed will maintain higher interest rates for a prolonged period. George Mateyo, chief investment officer at Key Wealth, commented, “The prospects of rate cuts remain, but they are not assured, and the Fed will likely need weakness in the labor market before they have the confidence to cut.”
Lawrence MacDonald, founder of “The Bear Traps Report,” predicts that interest payments as a percentage of federal spending in the U.S. will increase to 12.3% in 2024, up from 9.8% in 2023. Furthermore, recent government bond auctions have received a lukewarm response from investors, resulting in the 5-year U.S. Treasury yield reaching its highest levels in almost six months on April 25.
Bitcoin investors are cautious about the unsustainable path of U.S. government fiscal policies as the Fed faces a dilemma. Lowering interest rates to alleviate the debt burden could lead to higher inflation, which would further strain consumers and businesses, putting the Fed in a difficult position.
The deteriorating macroeconomic conditions extend beyond the U.S. to other major economies. On April 26, Japan, the world’s fourth-largest economy, witnessed a significant devaluation of its currency, the Japanese yen, reaching its lowest level since 1990. Additionally, Japan’s consumer price index for April showed a 1.8% inflation rate, lower than expected, raising doubts about consumer strength.
A user on the X social network, @Geiger_Capital, pointed out that the Bank of Japan (BOJ) is unable to raise interest rates due to the country’s staggering 265% debt-to-GDP ratio. While a weaker yen benefits exports, it has a negative impact on domestic consumption. Importantly, as the largest holders of U.S. Treasurys, Japanese investors’ movements have a significant impact on the global economy.
In conclusion, Bitcoin’s price has been affected by outflows from U.S. spot ETFs, regulatory pressures, and global economic downturns. However, some analysts believe that the weakened global economic conditions may lead to additional stimulus measures by central banks, which could be advantageous for Bitcoin due to its scarcity and resistance to censorship.
This article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making a decision.