Bitcoin Couldn't Surpass $72K For Several Reasons

Uncertainty surrounding regulations and unpredictable macroeconomic events might continue to dampen the potential for BTC price gains in the near future.

Source: economictimes.indiatimes.com

Between June 2 and 5, Bitcoin saw a 5.9% increase, yet its climb stopped at $71,746. This rise was backed by almost $1 billion inflow into U.S. Bitcoin spot exchange-traded funds, highlighting institutional investors' robust demand. Additionally, Bitcoin's upward trend was supported by the notable expansion of unrealized losses in the U.S. banking sector. Despite favorable circumstances, such as a more crypto-friendly approach from U.S. lawmakers, Bitcoin failed to breach the $72,000 mark.

Regulatory Uncertainty Remains Despite Positive Advancements

According to investment officers, regulatory uncertainty has been a deterrent for financial advisers in increasing their exposure to crypto. However, remains optimistic about the U.S. moving towards regulatory clarity, especially with the Democrats' decision to repeal the U.S. Securities and Exchange Commission's (SEC) Staff Accounting Bulletin 121.

The approval of spot Ethereum ETFs by the SEC indicates a shift in U.S. regulators' stance towards crypto, particularly after several legal defeats, including Grayscale’s GBTC Trust conversion into a traditional ETF. Despite these positive signals, Hougan highlights President Joe Biden's veto of the SAB 121 repeal as evidence that "crypto still has a long way to go."

A recent Federal Deposit Insurance Corporation (FDIC) report reveals that U.S. financial institutions are grappling with $517 billion in accounting losses due to higher rates impacting their residential mortgage-backed securities. The report, released on May 29, underscores the precarious financial position of 64 banks nearing insolvency in the first quarter of 2024.

The Price of Bitcoin Could Decline in Anticipation of Adverse Macroeconomic Events

It's argued that the most plausible solution is to increase money supply, which is particularly advantageous for scarce assets like Bitcoin. According to Hayes, Bitcoin's 43% surge over 30 days in March 2023 was prompted by the collapses of Silicon Valley Bank and Silvergate Bank, suggesting a potential repeat in 2024. However, even if this scenario unfolds, with the U.S. Federal Reserve injecting liquidity to avert widespread bankruptcy or alleviate banking system strains through repurchase agreements and special credit lines, Bitcoin's price is likely to initially decline if stock and bond markets face turbulence.

In March 2023, before the rally commenced, Bitcoin's price dipped to $19,559, its lowest in nearly two months. This movement mirrored the uncertainty reflected in the unusual drop of the U.S. 2-year Treasury yield from 5.07% to 3.98%, indicating traders' readiness to sacrifice yield for the security of government-backed assets. Consequently, investors may anticipate a price correction preceding a potential Bitcoin rally, although the repetition of the 2023 trend isn't guaranteed, particularly given the consistent inflows from U.S. spot Bitcoin ETFs, amassing over $52 billion since their January launch.

The Success of the Stock Market Doesn’t Necessarily Translate To a Positive Outcome for Bitcoin

Consideration should also be given to the impressive performance of the U.S. tech stocks, such as NVidia (NVDA), which propelled the S&P 500 index to an intraday all-time high of 5,342 on June 5. According to CNBC, analysts at UBS anticipate the Fed to implement two rate cuts this year, creating a favorable environment for stocks. Although not directly competing for the same investment capital as Bitcoin, a robust stock market performance diminishes the appeal of alternative assets. The recent 32% surge in GameStop’s (GME) price, driven by influencers and social media posts showcasing substantial gains, including those of 'Roaring Kitty' exceeding $85 million, could also dampen traders' interest in cryptocurrencies.

There are no significant barriers preventing Bitcoin from reaching a new all-time high in 2024. However, as long as investors maintain confidence in fixed-income assets and the stock market continues to thrive, there may be less motivation for Bitcoin to surpass the $71,000 mark in the immediate future.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.