Bitcoin Rises 2% Amid Positive Market Sentiment and Rising Inflation; 'Roaring Kitty' Returns to Social Media
Summary:
Bitcoin (BTC) appreciated 2% in the past 24 hours after struggling to breach the $61,500 resistance for two days. The climb above $62,500, regardless of the U.S. spot Bitcoin ETF flows', suggests Bitcoin's ongoing potential for positive price change. Cryptocurrency sentiment has been buoyed by China's release of $138 million in enduring bonds to invigorate its economy, with the market expecting more financial support from its central bank. Meanwhile, the U.S. Federal Reserve's steps to encourage borrowing may inadvertently push more money into scarce assets like Bitcoin, as investors seek to hedge against rising inflation induced by large-scale public spending. Notable is the potential influence of social media personality "Roaring Kitty," whose return to social media after three years has sparked anticipation within the Bitcoin community. A growing distrust in traditional finance, especially shown in recent government bailouts, might also pull more participants toward cryptocurrencies.
In the past 24 hours, Bitcoin (BTC) has seen an uptick of 2%, rallying after consecutive dual-day struggles to break the resistance at $61,500. This continued surge above $62,500 indicates that Bitcoin continues to have the capacity for positive price growth, irrespective of the conditions of the U.S. spot Bitcoin exchange-traded fund (ETF), which observed $100 million in net outflows across a four-day period.
Several elements have fostered a more positive outlook on cryptocurrencies, beginning with China's proclamation of deploying $138 million in enduring bonds to stimulate the economy. Although entirely anticipated since its disclosure in March, it reinforced the fact that nations are accepting the augmented risks of economic downturns. This announcement followed the release of data showing China's total credit saw a drop in April for the first time in seven years.
Financial investment director at Shanghai Anfang Private Fund Management, Zou Wang, suggested to Reuters that the market is now expecting additional financial support from China's central bank, potentially involving reductions to interest rates. Such measures would intensify the complications derived from the recent expansive tactics from the U.S. Federal Reserve (Fed), resulting in a boost of the U.S. monetary supply in March after a two-year hiatus.
At face value, pouring more money into the economy appears advantageous, but it could lead to a rise in inflation over the long run, particularly as companies and individuals potentially hold off on spending and investments. For fixed income investors, as they see their returns barely keeping up with escalating inflation, scarce assets like Bitcoin may gain appeal.
Investors are presumably bracing for a trend where government liquidity interventions become the norm to ward off economic calamities. Despite arguments that this added liquidity would largely benefit the stock market, increased interest rates unfavorably impact companies by inflating their capital expenditure. Any debt procured in the previous 16 years will encounter sharply higher rates when it comes to refinancing.
The Federal officials suggest the possibility of prolonged high interest rates, as reported by Yahoo Finance. Neel Kashkari, the Chair of Minneapolis Fed stated, "I think it’s much more likely we would just sit here for longer than we expect,” while Austan Goolsbee, the Chicago Fed Chair, said, "I think now we wait." This approach, although apparently contrary to the push for augmented liquidity, is carefully crafted to delay the surge of inflation.
In simple terms, the actions taken by the U.S. central bank aim to encourage borrowing from both companies and individuals to nurture employment and consumer markets. However, the uncertainty lies in the amount of borrowed money that will be spent on scarce assets as a hedge against inflation versus those actually stimulating the economy. It's too premature to fully assess such risks, but Bitcoin investors are doubtful about the Fed’s ability to achieve a soft landing.
Recently, the value of Bitcoin was impacted by the comeback of social media figure "Roaring Kitty," a key player in the GameStop (GME) stock surge in 2021. After a nearly three-year social media absence, Bitcoin community reacted positively in expectation of substantial influence from this figure.
There's growing anticipation amongst cryptocurrency investors for a favorable sentiment shift toward digital assets, spurred by escalating distrust in banks and traditional finance, particularly in the wake of recent government bailouts, including the saving of Philadelphia-based Republic First Bank. Investors predict that these events may consequentially draw more participants toward cryptocurrencies.
Please note that this article does not offer investment advice or suggestions. Each investment and trading decision brings with it potential risks, and it is advisable for readers to personally research all aspects before making any decisions.
Published At
5/13/2024 9:55:29 PM
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