This week, cryptocurrencies have taken the spotlight, outperforming traditional assets. A report from Bitwise Europe attributes this rise to increasing optimism about U.S. policy measures and the ongoing tightening of Bitcoin supply.
At the core of the report is a discussion about the potential establishment of a strategic Bitcoin reserve in the U.S. Pennsylvania has already enacted legislation supporting such reserves, sparking speculation that other states may soon follow suit. Betting activity on Polymarket has amplified these expectations, with the probability of establishing a national Bitcoin reserve soaring to over 50% last week.
The report also delves into Bitcoin's supply constraints, while demand from ETFs and corporations continues to grow. Inflows into U.S. spot Bitcoin ETFs have surged, outpacing the overall supply growth of Bitcoin, leading to a supply-demand imbalance. This shortage is reflected in Bitcoin's liquidity and high liquidity supply indices, both of which have fallen to historical lows.
Corporations are increasingly adopting Bitcoin as a reserve asset, with companies like Microstrategy making substantial purchases of Bitcoin, reinforcing this trend. Researchers further explain that Bitcoin is not the only cryptocurrency benefiting from the more transparent regulatory environment in the U.S. Altcoins, including XRP and meme coins like DOGE, have also made progress. The Department of Efficiency has taken a crypto-friendly stance, adding momentum to these assets (especially for DOGE). However, Ethereum has not kept pace. This lag may be related to capital flows favoring other cryptocurrencies. On a broader economic front, the U.S. CPI data for October aligned with forecasts. Together with other indicators, this has bolstered expectations for a potential rate cut by the Federal Reserve in December, introducing another variable into the evolving cryptocurrency narrative.
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