After almost two months of a complete economic shutdown, the United States of America is finally assessing certain provisional steps to reopen financial activity.
Many analysts in the market believe that Bitcoin could be one of the largest beneficiaries of this step, with the crypto-asset possibly eyeing a new price rally soon. May is also inlined with Bitcoin’s halving event, a time when the BTC supply in the market will be reduced down to 6.25 BTC per 10 minutes.
In order to understand the upcoming trend, we need to analyze certain market conditions associated with Bitcoin with respect to the traditional asset class and financial ecosystem.
Bitcoin has a favorable macroeconomic backdrop
Bloomberg’s recent crypto-outlook report suggested that Bitcoin’s market dominance of 66.4 percent had led to the crypto-asset attaining the gold standard in crypto, adding that a favorable macroeconomic environment will sustain a rally for the world’s largest digital asset.
The aforementioned argument does make sense because according to recent reports, Bitcoin’s volatility has been the lowest v. the stock market. The crypto-asset registered positive price appreciation on the charts and Bitcoin’s 180-day volatility was seen to be at a new low when compared to the S&P 500‘s gauge. The 180-day volatility drop is crucial because the previous all-time low in Bitcoin’s 180-day volatility had signaled the bull market in 2015, one which ended in 2017.
Some of Bitcoin’s on-chain fundamentals are favoring a bull run as well, with Bitcoin addresses approaching highs of June 2019. Previously, it was also reported that BTC rewards to revenue ratio had improved, registering a 6 percent hike on 30 April, its highest since last year.
With every factor lining up in favor of Bitcoin, the situation can necessarily pan out in a different situation as well.
Bitcoin Demand might fade as well
Central banks have been injecting a massive amount of money into the traditional asset class, but it is to be noted that U.S firms will also have to cope with over 30 million unemployed, at the moment. If global sentiments remain volatile, the market may react terribly to the second wave of COVID-19.
The possibility of a second wave of the virus is real and it can be speculated that any medium-term loss would end up reducing the demand for assets, including Bitcoin.
The demand would be driven down by the global financial bear market, which is still evident in the traditional asset class. If the fiscal stimulus is unable to avoid a bearish downturn, investors might necessarily dump their BTC and stock positions to facilitate the receipt of liquid cash.
Arthur Hayes, CEO of BitMEX had reverberated a similar sentiment in a recent newsletter,
“Bitcoin will be owned unlevered. Could the price retest $3,000? Absolutely. As the SPX rolls over and tests 2,000 expect all asset classes to puke again.”