Last week, the price of Bitcoin rebounded from $61,000 to $66,000 in one day, as the price index was lower than market expectations. Other cryptocurrencies also kept up with the rise of Bitcoin and performed surprisingly well. Ethereum also broke through the $3,000 mark. With the steady growth of market trading volume, we would say that the cryptocurrency market has recovered from its previous short-term lows and has regained the momentum of US technology stocks.
What was interesting last week was that the charm of meme stocks swept the market again, but then quickly cooled down in a short period of time. Meme stocks GME and AMC soared due to the return of "Roaring Kitty", the driving force behind the disappearance for three years. Meme coins also soared, especially PEPE, the most popular meme coin. However, meme stocks were sold off again in just two or three days, and the price immediately collapsed by more than 50% from the highest point, suggesting that the market speculation trend is on the rise again.
Investors are no longer so afraid of the bear market. Everyone knows that even if cryptocurrencies and stock markets fall, it is only a short-term situation and will eventually rise back to their original prices. I believe that the risk appetite in the risky asset market is rising rapidly in the short term. Almost everyone knows that they must reinvest their wealth in the risky market and reap the rewards. It is expected that the speculative atmosphere will quickly strengthen in the near future, and there may be a wave of small and medium-sized tokens rising.
Let's get back to inflationary pressure. The price index released by the U.S. Department of Labor is undoubtedly the key to the reversal of the cryptocurrency market. Two weeks ago, I said that tightening expectations have reached their peak. As long as the employment or price data improves slightly or is lower than market expectations, the cryptocurrency price may reverse.
As a result, the consumer price index showed signs of slowing growth in just two weeks. Although the actual annual growth rate of 3.5% was only 0.1% lower than the expected 3.4%, which is almost within the error range, the market still gave it a very positive evaluation. Most analysts reported that the consumer price index confirmed that "the downward trend in inflation growth remains unchanged."
Bitcoin price will return to ETF buying, but still needs to overcome many challenges
In other words, it doesn't matter how much the numbers differ. As long as there are no surprises, investors will conclude that inflation is slowing and prices will rise. In addition, the market atmosphere last month was indeed overly pessimistic. This adjustment back to normal will help risky assets rise across the board. The Dow Jones and Nasdaq indices all broke new highs, and Bitcoin returned to US$66,000. However, in the case of a low degree of leverage, the short squeeze force is not enough to bring Bitcoin back to the target price of US$70,000.
Since the negative impact of interest rate policy has been eliminated and profits have been realized, Bitcoin will return to the real side next: Can the Bitcoin ETF continue to grow and attract more investors to join? According to Farside data statistics, the price index was announced on May 14, and the Bitcoin ETF received more than US$100 million in inflows in the following days, and even US$300 million inflows on May 16, becoming the main driver of Bitcoin prices.
However, when it comes to Bitcoin ETF, since Bitcoin ETF is a cash redemption system, most fund companies currently rely on crypto exchanges such as Coinbase to provide market liquidity. Fund companies will directly use institutional accounts to buy and sell cryptocurrencies on the exchange, and buy and sell according to the fund balance settled daily. Assuming a net outflow of funds, the fund company must sell Bitcoin and pay the US dollars obtained to customers. Conversely, if there is a net inflow, the fund company will directly use US dollars to purchase Bitcoin.
Considering the growing scale of Bitcoin ETFs, Wall Street's investment preference for Bitcoin has become the main factor affecting prices, while also bringing ample profits to Coinbase. This month's earnings report results were quite good. In addition to successfully turning operations positive, net profit increased more than tenfold. The key is to obtain these huge customers such as fund companies and provide them with high-net-profit services such as market liquidity.
However, CME also announced last week that it will enter the Bitcoin spot trading market, which is likely to snatch profits from Coinbase's business, causing its stock price to fall 9% in one day. This shows that the U.S. securities industry continues to be optimistic about the emerging Bitcoin business and expects it to bring more profits. The growth of the market should be able to accommodate more exchanges, which will help the entire crypto market to continue to develop steadily. I am optimistic that Bitcoin prices will continue to rise as more and more fund companies and securities trading institutions enter the market, maintaining the recent reasonable price of US$70,000 unchanged.
If Bitcoin wants to hit another new high, it needs the assistance of a Bitcoin ETF. Although there was a net inflow of US$560 million in the last three days of last week, pushing the price of Bitcoin back to US$67,000, more buying is needed, and it will reconnect with US technology stocks next.
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