Despite testing the $65,000 support on June 14, Bitcoin (
BTC
) has managed to stay above $66,000 since May 17. Even though BTC couldn’t break through the $72,000 resistance in the past four weeks, recent developments have boosted regulatory sentiment and underscored the limited maneuvering space left for the U.S. central bank before triggering inflation. Positive market conditions and robust Bitcoin derivatives metrics suggest there is minimal downside risk.
The sentiment towards crypto in Washington is gradually becoming more favorable. On May 16, U.S. lawmakers passed a Congressional Review Act to investigate an SEC rule that mandates listed companies, including banks, to account for crypto assets as both assets and liabilities on their balance sheets. Senator Cynthia Lummis hailed this move as a significant milestone, marking the first “standalone crypto legislation” endorsed by Congress.
Although President Joe Biden ultimately vetoed the resolution, the opposition from Democrats highlights the growing influence of crypto participants in U.S. politics, as noted by Bitcoin Policy Institute fellow Craig Warmke. Biden’s veto poses a roadblock, but overriding it would require a two-thirds majority in both chambers of Congress.
The banking sector is motivated to offer custody services for cryptocurrencies to capitalize on the ongoing crypto adoption wave. Daniel McCabe, chief compliance officer of Flexa, suggests that the pro-crypto lobby and the banking industry could sway decisions. Perianne Boring, founder and CEO of the Digital Chamber blockchain trade association, views the Democrats’ support as a pivotal moment for the Biden administration. Boring sees Schumer’s backing as a positive shift for crypto in Washington, putting Biden in a position to evaluate the implications of vetoing H.J.Res. 109 and potentially sparking internal discord within the Democratic party.
The Federal Reserve is poised to reverse its tight monetary policy soon. With inflation persisting above the 2% target and a slight uptick in unemployment, the Fed faces mounting pressure to lower interest rates to avert an economic downturn. Market concerns about future economic growth are evident in the U.S. 2-year Treasury yield hitting a 70-day low on June 14, while the S&P 500 reached record highs. The Fed’s cautious optimism about inflation stabilization is reflected in its decision to slow down the quantitative tightening program. However, delaying policy adjustments could exacerbate economic slowdowns due to high borrowing costs impacting consumer spending and business investment.
In terms of Bitcoin derivatives, despite an 8.5% price drop from June 6 to June 14, the primary metrics remained stable. The Bitcoin 2-month futures premium stayed above 10% on June 14, indicating a bullish market sentiment. The derivatives market showed no signs of stress or overwhelming demand for short positions, suggesting a strengthening of the $65,000 support level given the current regulatory and economic landscape.
Disclaimer: This article is for informational purposes only and should not be construed as legal or investment advice. The views expressed are solely those of the author and do not necessarily represent those of Cointelegraph.