Bitcoin Price Steady after ETF Flows, Ahead of Today’s Expected Rate Cut

As a seasoned researcher with over two decades of experience in financial markets, I’ve witnessed numerous market fluctuations, but the recent surge in Bitcoin (BTC) activity has left me genuinely intrigued. The Trump Pump, as it’s being dubbed, is an interesting phenomenon that underscores the interplay between politics and finance.


On Wednesday, Bitcoin (BTC) delivered an impressive showing, ranking among its top four performances of the year, largely due to Donald Trump’s win in the U.S. presidential election. During his political run, Trump expressed favorable views towards the cryptocurrency sector, a stance that didn’t go unnoticed by the market.

The leading digital currency, as per BNC data, witnessed a significant jump of more than 9%, reaching an unprecedented level of $76,442. This recent escalation joins other substantial increases: a 9.7% rise in late February which took Bitcoin to its prior high in March, a 10% recovery after a mid-year decline, and a 12% upward movement following the unwinding of the yen carry trade on August 5. Each instance highlights Bitcoin’s robustness and its capacity to seize significant economic and political changes.

Currently, Bitcoin is priced at approximately $76,333, maintaining its weekly gains before today’s Federal Reserve meeting. Following Donald Trump’s election victory, attention now focuses on the Federal Reserve’s impending decision regarding interest rates. Analysts predict a 0.25% reduction, likely to occur later today. Generally, reduced borrowing costs benefit risky assets such as cryptocurrency; however, this time, the effect may be less pronounced. According to the CME FedWatch tool, traders are almost universally in agreement, assigning a nearly 100% chance that the Federal Reserve will lower its key rate to 4.5%-4.7%. Essentially, the market has already incorporated this cut into its expectations, making it more of a formality than a game-changer.

The increase in activity occurred post the election of President-elect Donald Trump, sparking renewed optimism and investor interest in cryptocurrencies, particularly Bitcoin-based Exchange-Traded Funds (ETFs). Remarkably, IBIT’s trading volume surpassed prominent companies such as Berkshire Hathaway, Netflix, and Visa, signifying a swift growth in the Bitcoin ETF market, making it an increasingly popular investment choice.

On November 6th, IBIT took the lead, recording its all-time highest trading day and contributing to an approximately $6 billion combined trading volume among nine Bitcoin ETFs in the U.S. Eric Balchunas, a strategist for ETFs, characterized this day as a “spectacular day” for Bitcoin ETFs, as they collectively attracted $622 million in investments – their highest inflow in recent months. Fidelity’s FBTC ETF saw the most significant net inflows with over $300 million, while Ark Invest’s ARKB and Bitwise’s BITB added $127 million and $100.9 million respectively. Despite IBIT’s substantial trading activity, it experienced a net outflow of $68 million, which was contrary to the inflows observed in other Bitcoin ETFs.

The Trump Pump

The heightened trading activity can be linked to anticipation that Trump’s government will introduce policies beneficial to the digital assets industry. Trump has expressed his intention to place the U.S. at the head of the global digital economy, which has enhanced Bitcoin’s attractiveness as an alternative investment option.

The price of Bitcoin hit an all-time peak of $76,475 on Wednesday and remained close to $75,000 by Thursday morning. Some financial experts speculate that President Trump’s pro-business policies might foster increased investment in Bitcoin, especially if his administration takes steps towards providing clear regulations for cryptocurrencies.

As a crypto investor, I’ve noticed an even wider performance gap between Bitcoin and gold recently, as gold has been on a downtrend due to inflation worries and expectations of interest rate increases. Interestingly, data from Bloomberg reveals that Bitcoin’s correlation with traditional equities has been climbing, currently sitting at 0.66 in terms of its 60-day correlation with the MSCI Global Equity Index. This high level of correlation implies that Bitcoin is increasingly mirroring the movements of the stock market, seemingly influenced by President Trump’s market-friendly policies.

The current market trends show a growing faith among investors, especially institutions, in Bitcoin. Dylan LeClair, a well-known Bitcoin analyst, foresees that under Trump’s administration, the U.S. government might start holding Bitcoin as a strategic reserve asset. LeClair believes that if this happens, other countries may quietly follow suit, potentially expanding Bitcoin’s influence in global finance.

 

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2024-11-07 21:16