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Bitcoin’s (BTC) impressive 7.6% price increase between April 6 and April 8, reaching an intraday peak of $72,747, has sparked widespread speculation about the underlying causes.
While some may point to inflows from spot Bitcoin exchange-traded funds (ETFs) as the main factor, it’s also very likely that a range of macroeconomic factors or halving anticipation played a major role. Crypto intelligence firm Santiment suggested that increased trader activity has persisted and it remains to be seen whether it will stick after the halving event expected to take place on April 19.
📊 #Bitcoin #ETF volume hasn't slowed down four weeks after the $BTC #AllTimeHigh. Among $GBTC, $IBIT, $FBTC, $ARKB, $BTCO, $BITB, and $HODL, trader activity is still notably higher than the turning point that began in late February after an influx of individual trading began… pic.twitter.com/LErr5T8BWF
— Santiment (@santimentfeed) April 7, 2024
It seems unlikely that Ethena’s purchase of $500 million in Bitcoin for its USDCe stablecoin collateral was the sole driver, given Bitcoin’s large daily spot trading volumes. Rather, investors’ expectations about the economy and cost of capital are likely more significant. Periods of increased liquidity and stimulative monetary policies tend to benefit scarce assets like Bitcoin, especially during times of persistent inflation.
After the unprecedented growth or USDe since launch, Ethena hedges represent ~20% of ETH open interest as of today
With $25bn of BTC open interest readily available for Ethena to delta hedge, the capacity for USDe to scale has increased >2.5x pic.twitter.com/glyvBQFEwj
— Ethena Labs (@ethena_labs) April 4, 2024
A disagreement
JPMorgan Chase CEO Jamie Dimon recently warned that the resilient U.S. economy could lead to stickier inflation and higher rates than expected. This helps explain premiums on gold ETFs in China as investors brace for inflation amid concerns over U.S. fiscal debt, exacerbated by recent government spending packages.
The banker’s comments follow Goldman Sachs chief investment officer, Sharmin Mossavar-Rahmani, claiming that Bitcoin is not considered an investment asset class and that the bank does not believe in cryptocurrencies. He said:
If you cannot assign a value, then how can you be bullish or bearish?
While some may argue that these dynamics don’t inherently favor Bitcoin since inflation erodes disposable income and rising U.S. debt could trigger a downturn, it’s hard to predict how investors will react given Bitcoin’s fluctuating correlations with stocks and gold. Escalating U.S.-China trade tensions may have also boosted interest in Bitcoin and gold as hedges.
Notably, gold hit a record $2,354 on April 8 even as Treasury yields climbed, defying their typical inverse relationship. The same day, Treasury Secretary Janet Yellen said the U.S. may impose tariffs on subsidized Chinese clean energy products and noted other nations may also restrict trade with China.
I wouldn’t rule out anything out at this point. We need to keep everything on the table. We want to work with the Chinese to see if we can find a solution. […] We just want to make sure that we’re not driven out of business, and that our firms and workers have opportunities in these industries which will be important ones in our future.
In this context, Bitcoin’s surge to $72,000 likely reflects investors seeking a hedge against worsening global economic relations and fallout from U.S. stimulus measures, rather than being driven mainly by one-off Bitcoin purchases from certain investors. A confluence of macroeconomic factors appears to be the more plausible explanation.
The recent updraft that took Bitcoin’s price higher and higher took hold after the U.S.’s approval of spot Bitcoin spot exchange-traded funds (ETFs) back in January, propelling the cryptocurrency to breach the $70,000 mark for the first time.
