Bitcoin Maintains Stable Despite Major ETF Outflows and Rising Regulatory Scrutiny
Summary:
Bitcoin managed to remain above $63,000 on April 26, despite unfavorable influences including major outflows from Bitcoin spot exchange-traded funds (ETFs), increased regulatory scrutiny, and heightened inspection of cryptocurrency transactions by U.S. Senators. The global economic downfall and the lower-than-expected U.S. GDP growth are raising market expectations that the Fed may uphold higher interest rates over an extended duration, causing some alarm for Bitcoin investors. Despite these challenges, some analysts believe weaker global economic conditions could lead to additional stimulus measures by central banks, potentially benefiting Bitcoin.
Despite various unfavorable factors, Bitcoin managed to maintain its value over $63,000 on April 26. This situation arose in the midst of major withdrawals from Bitcoin spot exchange-traded funds (ETFs) in the US over a couple of days, increased regulation marked by a stern warning from the FBI regarding unauthorized cryptocurrency services, and intensified inspection of cryptocurrency dealings by U.S. Senators. On April 25, a net outflow totaling $218 million was witnessed by Bitcoin spot ETFs in the US, following a $120 million departure a day before, as stated by Farside Investors. Only Franklin Templeton managed to log inflows on April 25, indicating that the withdrawal trend isn't solely due to elevated charges at Grayscale GBTC.
On the same day, Elizabeth Warren and Bill Cassidy, U.S. Senators, penned a letter addressed to the U.S. Department of Justice and Homeland Security. Their intent was to query about the actions undertaken to address the problem of anonymity in cryptocurrency payments for child abuse content. They cited a report from Chainanalysis while stressing the necessity for penalties for those disseminating such illegal content.
Despite an unfavorable economic outlook, Bitcoin remains resilient. Pro-bitcoin individuals are deriving hope from the global economic deterioration, particularly in light of a 2.8% year-to-year increase in the personal consumption expenditure (PCE) in the United States as of March. The rise in inflation, surpassing the Federal Reserve's target, raises concerns, especially with the GDP growth of the US for the first quarter below expectation at 1.6%.
It is anticipated that the Federal Reserve will continue to uphold high interest rates over an extended duration, according to CNBC. Key Wealth's chief investment officer, George Mateyo, states that although rate cuts are likely, they are not guaranteed, and the Federal Reserve requires a recession in the employment market to confidently execute cuts.
Lawrence MacDonald, founder of “The Bear Traps Report,” projects an increase in the percentage of interest payments in federal spending in the U.S. to 12.3% by 2024 (up from 9.8% in 2023). Furthermore, recent Government bond auctions have received lukewarm response from investors, resulting in a near six-month high for the 5-year U.S. Treasury yield on April 25.
Bitcoin investors express concern over the Government's fiscal methods as the Federal Reserve faces a predicament. Decreasing interest rates to mitigate the debt burden might lead to rising inflation, adversely affecting consumers and enterprises, thereby placing the Federal Reserve in an uncertain situation.
The unfavourable macroeconomic conditions reach further than the US, impacting other significant economies. Japan, the fourth-largest economy worldwide, recorded a considerable depreciation of its currency (the Japanese yen) to its lowest since 1990 on April 26. Japan's consumer price index for April also revealed lower than expected inflation rates of 1.8%, casting a shadow over consumer power.
A user from X social network (@Geiger_Capital) highlighted that the Bank of Japan (BOJ) cannot increase interest rates due to the country's towering 265% debt-GDP ratio. Although a weaker yen can benefit exports, it negatively impacts domestic consumption. With Japanese investors being the major holders of U.S. Treasurys, their actions hold substantial influence over the global economy.
Despite outflows from U.S. spot ETFs, regulatory pressures, and global economic downturns negatively affecting Bitcoin's price, some economic analysts contend that weaker global economic conditions may push central banks to implement additional stimulus measures. These could be advantageous for Bitcoin due to its scarcity and resistance to censorship properties.
Published At
4/26/2024 10:30:00 PM
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