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What’s behind bitcoin’s latest surge?


A little under three months later, bitcoin found its groove again. It has outperformed other significant commodities this year with gains of more than 70%, and on Wednesday, it was trading at its highest level in nine months.

The first and biggest cryptocurrency has previously experienced steep price increases and equally steep declines over the course of its 15-year existence. Interest Rates: Increasing Profits.

According to six investors and analysts from the crypto and traditional finance sectors who spoke to Reuters, markets anticipate central bank increases in credit costs are approaching their peak and look set to encourage riskier assets like bitcoin.

According to economist Noel Acheson, who has been following the cryptocurrency industry for seven years, “the macro narrative is number one.” Bitcoin is not only a risk asset; it is probably the one that is most sensitive to monetary liquidity among all risk assets.

There are other factors at play as well, such as the banking industry’s unrest and persistent but unfulfilled hopes that bitcoin will become a widely accepted method of payment.

On Sunday, Bitcoin ended its greatest week in four years and has gained 45% in just 12 days.

The idea that bitcoin is an asset resistant to risks in conventional finance gained momentum as the failure of US lenders Silicon Valley Bank and Signature Bank contributed to Sunday’s takeover of 167-year-old Credit Suisse by rival UBS. Is.

Usman Ahmed, CEO of cryptocurrency exchange Zodia Markets, the venture arm of Standard Chartered, and Hong Kong-based crypto company BC Technology Group, argued that it is “narrow-minded” to predict that bitcoin will be effective.

But trust is also a significant element, and it has been damaged in the banking system.

Analysts claimed that bitcoin’s primary user base of retail investors has been an advantage. According to the interviews, institutional investors like pension funds are likely to continue to be skeptical of a long-lasting renaissance for the cryptocurrency because they have been cautious of the unstable and largely unregulated bitcoin.

“Bitcoin’s recent bull run has been primarily supported by individual investors – from retail to whales,” said Zhong Yang Chan, director of research at cryptocurrency data company CoinGecko. “We have seen evidence of institutions exiting during this rally.”

In reality, according to digital asset manager CoinShares, large investors’ preferred bitcoin investment products experienced outflows of $113 million last week as a result of the need to find liquidity in the face of chaos in the banking industry.

Do you feel familiar?

Even in the past, sharp fluctuations in the price of bitcoin have been closely associated with shifts in monetary policies around the world.

The COVID-19 pandemic flooded the world’s financial system with stimulus measures, and investors who remained at home witnessed a six-fold increase in bitcoin prices between September 2020 and April 2021.

These actions, along with the growing interest in cryptocurrencies from institutional investors and businesses, led crypto supporters to declare that a collapse was less likely than the one typically observed after bitcoin rallies.

However, as signs of escalating inflation drove governments and central banks to scale back stimulus measures in late 2021, bitcoin fell by more than half from its record high of $69,000 in just 75 days as rates rose. started to expand

When interest rates increased in 2022, a significant crypto token collapsed, causing the closure of significant hedge funds and crypto lenders, and bitcoin dropped by more than 65%. Regulation-related difficulties and the sharp fall of the FTX exchange further harmed it.

Despite assertions by supporters that bitcoin is a secure haven asset in times of political and economic stress, the disastrous year served as another warning of the cryptocurrency’s susceptibility to outside shocks.

Undoubtedly, some investors claim that changes to bitcoin’s intrinsic qualities can now sustain the price. For instance, a software update that allowed a new breed of non-fungible tokens on bitcoin was mentioned by Richard Galvin of cryptocurrency fund Digital Asset Capital Management.

Investors in conventional securities continue to be skeptical, though.

According to Stephen Gallo, European Head of FX Strategy at BMO Capital Markets, “I don’t know that the old-school currency people are reevaluating it.” “We and bitcoin continue to disagree on what constitutes currency,”


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