As the cryptocurrency market suggests further gains, Bitcoin is trending to the upside in the short-term. Positive earnings season and a rise in U.S. Federal Reserve interest rates seem to have driven the bullish momentum.
An increase of 75 basis points (bps), in the interest rate was announced by the bank, while remaining within market expectations. Bloomberg Intelligence’s Senior Commodity Strategist Mike McGlone believesThe Fed may have been the one to mark the Bitcoin pivot.
Financial institutions can allow for the bullish tendency to continue by following market expectations. As measured by the Consumer Price Index, (CPI), inflation has been a goal of the Fed to keep the U.S. dollars from rising.
The metric is at an all-time high of 40 years, but it seems to be trending downwards. The Bloomberg Intelligence analyst claims the price decrease across the commodities sector hints at this possibility and could provide the Fed with the support to “lighten the rate hike sledgehammer”.
Stores of value assets like Gold and U.S. Treasury Bonds would see this as a boon. The cryptocurrency has been suffering, McGlone argues because it’s deemed a nascent asset with relatively new technology.
This disadvantage might fade into the background as Bitcoin’s adoption curve increases versus its total supply. As seen below, if the cryptocurrency follows the internet’s adoption curve, it could record over 1 billion users by 2025.
In the short term, BTC’s price might benefit from mitigation in the macro-economic factors playing against it. The next major event will be July’s CPI print to be announced in August, which might result in more fuel for the current bullish price action. McGlone wrote:
(Fed’s) “meeting by meeting” comment may mark the pivot for #Bitcoin to resume its tendency to outperform most assets. For the benchmark crypto, new and untested assets are quickly becoming too much for them. They may be in the early days of a recovery from a serious drawdown.
Can Bitcoin Resume Its “Propensity To Outperform”?
Additional data provided by McGlone shows a decrease in BTC’s price 250-day volatility versus the Bloomberg Commodity Spot Index. This metric tends to trend downward, and the Bitcoin price reacts by moving in the opposite way.
A decline in BTC’s price 250-day volatility marked the beginning of the 2012 and 2017 rallies. McGlone noted that McGlone was right in this sense:
The lowest-ever Bitcoin volatility vs. the Bloomberg Commodity Index (BCOM) may portend a resumption of the crypto’s propensity to outperform (…). If the past is any indication, Bitcoin volatility is likely to rebound vs. commodities as crypto heads toward new heights.