Bitcoin saw a 5.9% increase between June 2 and 5, peaking at $71,746, supported by almost $1 billion in inflows into U.S.-based spot Bitcoin exchange-traded funds (ETFs).
This indicates strong demand from institutional investors. Despite favorable conditions like a more crypto-friendly stance from U.S. lawmakers, Bitcoin couldn’t break the $72,000 barrier.
Bitcoin’s bullish momentum was partly due to the significant unrealized losses in the U.S. banking sector. However, regulatory uncertainty persists.
According to Matt Hougan, Bitwise’s chief investment officer, this uncertainty has kept financial advisers from increasing their crypto exposure.
Hougan believes the U.S. is moving toward regulatory clarity, starting with the Democrats’ vote to repeal the SEC’s Staff Accounting Bulletin 121.
The SEC’s approval of spot Ether ETFs suggests a softer stance towards crypto.
Yet, U.S. President Joe Biden’s veto of the SAB 121 repeal indicates that “crypto still has a long way to go,” Hougan notes.
An FDIC report states that U.S. financial institutions are currently facing $517 billion in accounting losses due to higher rates impacting their residential mortgage-backed securities, with 64 banks near insolvency in the first quarter of 2024.
Arthur Hayes, BitMEX co-founder, argued that printing more money could be a solution, favoring scarce assets like Bitcoin.
Hayes links Bitcoin’s 43% bull run starting in March 2023 to the collapses of Silicon Valley Bank and Silvergate Bank.
READ MORE: Bitcoin Surges to Two-Week Highs Amid Fresh Institutional Inflows and ETF Approvals
He suggests a similar pattern could occur in 2024. However, even if the Federal Reserve injects liquidity to prevent widespread bankruptcy, Bitcoin’s price might first decline if the stock and bond markets suffer.
Before the March 2023 rally, Bitcoin’s price dropped to $19,559, reflecting market uncertainty similar to movements in the U.S. two-year Treasury yield.
This indicates that traders were willing to trade yield for the security of a government-backed asset.
Investors might anticipate a price correction before another Bitcoin rally, although the consistent inflows into U.S. spot Bitcoin ETFs, totaling over $52 billion since January, could prevent this.
Additionally, the strong performance of U.S. tech stocks, such as Nvidia, pushed the S&P 500 index to an intraday all-time high of 5,342 on June 5. UBS analysts expect the Fed to cut rates twice this year, creating a “healthy backdrop for stocks,” according to CNBC.
This strong stock market performance might reduce incentives for alternative assets like Bitcoin.
GameStop’s 32% surge, driven by influencers and social media posts, may also divert interest from cryptocurrencies.
In summary, while Bitcoin could reach a new all-time high in 2024, the current comfort with fixed-income and stock market investments reduces the immediate incentive for a push above $71,000.
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