Bitcoin (BTC) has not closed below $66,000 since May 17, despite testing the $65,000 support on June 14. While the cryptocurrency failed to break above the $72,000 resistance over the past four weeks, certain events have boosted regulatory sentiment and shed light on the limited options available to the U.S. central bank to avoid triggering inflation. Positive market conditions and strong Bitcoin derivatives metrics suggest that any potential downside is minimal.
The attitude towards crypto in Washington is gradually becoming more favorable. In a significant move on May 16, U.S. lawmakers passed a Congressional Review Act to investigate a Securities and Exchange Commission (SEC) rule that mandates listed companies, including banks, to account for crypto assets as both assets and liabilities on their balance sheets. Senator Cynthia Lummis hailed this decision as a landmark moment, marking the first standalone crypto legislation approved by Congress.
Although President Joe Biden ultimately vetoed this resolution, the pushback from Democrats underscores the increasing presence and influence of crypto advocates in U.S. politics. Craig Warmke, a fellow at the Bitcoin Policy Institute, noted that both chambers of Congress would require a two-thirds majority to overturn the veto.
The banking sector is incentivized to provide custody services for cryptocurrencies, as banks are eager to capitalize on the ongoing adoption of digital assets. Daniel McCabe, chief compliance officer of Flexa, believes that pro-crypto lobbying efforts and the banking industry could have a significant impact on shaping future regulations.
Perianne Boring, founder and CEO of Digital Chamber, described the Democrats’ support as a pivotal moment for the Biden administration, with Senate Majority Leader Chuck Schumer’s backing signaling a positive shift towards crypto in Washington. Biden will need to carefully consider whether vetoing the H.J.Res. 109 is worth the potential risk of sparking internal conflicts within the Democratic party.
The Federal Reserve is under growing pressure to reverse its current tight monetary policy amidst rising inflation and softening labor market conditions. With inflation persistently above the Fed’s 2% target and a slight increase in unemployment, market concerns about economic growth have led to a decline in the U.S. 2-year Treasury yield. The Federal Reserve’s cautious approach to monetary policy includes a slowdown in its quantitative tightening program, as it aims to stabilize inflation without exacerbating economic slowdowns.
Despite a recent 8.5% drop in Bitcoin’s price between June 6 and June 14, the cryptocurrency’s derivatives market has shown resilience. The Bitcoin futures premium, which measures the difference between monthly contracts in derivatives markets and the spot price on regular exchanges, remained above 10% on June 14, indicating a bullish market sentiment. Amid current regulatory and economic trends, the $65,000 support level is likely to remain strong.
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