On Friday (September 20), Bitcoin surged more than $1,500 and once exceeded $64,000. Driven by hopes for a soft landing of the U.S. economy and strong unemployment claims data, as well as the re-inflow of funds from Wall Street ETFs, the buying demand in the cryptocurrency market was boosted. BlackRock called Bitcoin a unique decentralized tool, emphasizing its inverse relationship with traditional risk assets.
The FOMC cut rates by 50 basis points on Wednesday, although the dot plot suggests a more gradual easing cycle ahead. The Fed is getting more aggressive despite its efforts to resist market expectations of easing. Markets initially lowered expectations after the central bank's decision, but now expect an additional 75 basis points of rate cuts before the end of the year. Markets are pricing in a further reduction of nearly 250 basis points in the federal funds rate over the next year, which would take the federal funds rate well below neutral.
On Thursday, U.S. economic data raised expectations of a soft landing for the U.S. economy, boosting demand for riskier assets.
Initial jobless claims in the US fell from 231k in the week ended September 7 to 219k in the week ended September 14. The unexpected drop in jobless claims is in line with the Federal Reserve's expectations of a soft landing for the US economy, boosting demand for riskier assets.
Strong labor market conditions can support wage growth and disposable income, which could boost consumer spending, which accounts for more than 60% of the U.S. economy.
On Thursday, the U.S. bitcoin spot ETF market saw inflows for the fifth consecutive day in six trading days, indicating a recovery in demand for bitcoin.
According to Farside Investors, the ARK 21Shares Bitcoin Spot ETF (ARKB) saw a net inflow of $81.1 million, compared to a net outflow of $43.4 million the day before; the Fidelity Bitcoin Spot ETF (FBTC) saw a net inflow of $49.9 million, compared to zero the day before; and the Bitwise Bitcoin Spot ETF (BITB) reported a net inflow of $10.4 million, compared to a net outflow of $3.9 million the day before.
Excluding BlackRock Bitcoin Spot ETF (IBIT) flows, U.S. bitcoin spot ETFs saw net inflows of $158.3 million on Thursday, following net outflows of $52.7 million the day before.
Expectations of further interest rate cuts by the Federal Reserve in November and December, coupled with hopes for a soft landing for the U.S. economy, could push Bitcoin towards $70,000.
On Thursday, Michael Saylor, founder and chairman of U.S.-listed giant MicroStrategy, shared BlackRock's latest research paper, describing Bitcoin as a unique diversified investment tool.
He noted: “Bitcoin is a unique diversification vehicle for investors. BlackRock has published some excellent research on the subject, clarifying Bitcoin’s value and dispelling common misconceptions.”
BlackRock identified four key points:
1. Given Bitcoin’s unique characteristics and limited history, it is difficult for investors to analyze Bitcoin’s performance relative to traditional asset classes;
2. Traditional risk assets and Bitcoin have different risk and return drivers, so the traditional financial framework (risk taking vs. risk aversion) does not apply;
3. Due to the scarcity, non-sovereignty and decentralized nature of Bitcoin, some investors believe that Bitcoin is a safe haven;
4. Bitcoin adoption may depend on concerns about global monetary stability, geopolitical stability, U.S. fiscal stability, and U.S. political stability. BlackRock believes that Bitcoin has an inverse relationship with traditional risk assets in terms of these stability effects.
BlackRock is one of the first companies to issue a U.S. Bitcoin spot ETF and is in a leading position, with a total net inflow of $20.924 billion since January 11, 2024. The Bitcoin spot ETF market still has a great influence on Bitcoin price trends.
On January 10, 2024, Bitcoin was trading at $46,716. The trend of US Bitcoin spot ETF flows will continue to be a focus of investors, and it remains critical from a supply and demand perspective.
Bitcoin Technical Analysis
FXEmpire analyst Bob Mason said Bitcoin remains well above the 50-day and 200-day EMAs, confirming the bullish price trend.
A breakout above Thursday’s high of $63,888 and the $64,000 resistance level could signal a move towards $67,500. Additionally, if the price revisits $67,500, the bulls could rush towards $70,000.
Conversely, a break below the $60,365 support could allow the bears to attack at the 50-day and 200-day EMAs. A break below the EMAs will signal a bullish trend reversal that could push Bitcoin towards the $55,000 level.
With a 14-day RSI reading of 61.04, Bitcoin could rise to $65,000 before entering the overbought zone.
