Bitcoin experienced a 5.9% increase from June 2 to 5, reaching a peak at $71,746 before its rally came to a halt. This surge was driven by nearly $1 billion flowing into spot Bitcoin exchange-traded funds (ETFs) based in the United States, highlighting a strong demand from institutional investors.
The positive momentum of Bitcoin was further supported by the considerable growth of unrealized losses in the U.S. banking sector. Despite favorable conditions, such as a more crypto-friendly stance from U.S. lawmakers, Bitcoin (BTC) struggled to break the $72,000 barrier.
Regulatory uncertainty remains a concern despite recent positive developments. Matt Hougan, Chief Investment Officer at Bitwise, pointed out that financial advisers are hesitant to increase their exposure to crypto due to regulatory ambiguity. However, Hougan believes the U.S. is making progress towards regulatory clarity, especially after Democrats voted to repeal the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin 121.
The approval of spot Ether (ETH) ETFs by the SEC indicates a shift towards a more crypto-friendly approach by U.S. regulators following several legal setbacks, including the conversion of Grayscale’s Bitcoin Trust into a regular ETF. Nevertheless, President Joe Biden’s veto of the SAB 121 repeal suggests that the crypto industry still faces significant challenges.
A recent report by the Federal Deposit Insurance Corporation (FDIC) revealed that U.S. financial institutions are carrying $517 billion in accounting losses due to the impact of higher rates on residential mortgage-backed securities. The report also highlighted that 64 banks were on the verge of insolvency in the first quarter of 2024.
Arthur Hayes, co-founder of BitMEX, suggested that the solution to economic challenges may involve “printing more money,” a scenario favorable for scarce assets like Bitcoin. Hayes pointed out that past Bitcoin rallies were triggered by financial crises, hinting at a potential price drop ahead of negative macroeconomic events.
Investors may anticipate a price correction before a potential Bitcoin rally, especially considering the unusual movements in the U.S. two-year Treasury yield. Despite uncertainties, the consistent inflows into U.S. spot Bitcoin ETFs totaling over $52 billion since January suggest a positive outlook for Bitcoin.
While the stock market continues to perform well, with tech stocks like NVidia driving the S&P 500 index to new highs, there may be less incentive for investors to turn to alternative assets like Bitcoin. Influencer-driven surges, such as GameStop’s recent pump, could divert attention away from cryptocurrencies.
In conclusion, while Bitcoin may still have the potential to reach new all-time highs in 2024, the current market conditions and investor sentiments towards traditional assets could hinder a significant breakthrough above $71,000 in the short term. This article serves as general information and should not be construed as legal or investment advice. The opinions expressed are solely those of the author and do not necessarily reflect the views of Cointelegraph.