Bitcoin’s Struggle Amidst Global Growth Optimism
Despite the increasing positive outlook in the global economic landscape, Bitcoin and the wider cryptocurrency market have not been able to take advantage of the improved sentiment, instead experiencing significant losses throughout the month of August. This occurs as global stocks rebound towards historic highs, overcoming concerns about the growth of the US economy.
Specifically, the largest digital asset, Bitcoin, has seen a 9% decrease this month, in contrast to the nearly 1% gain in MSCI Inc.’s world share index and the surge in gold prices to all-time highs. Moreover, Bloomberg’s global bond gauge has shown an increase of almost 2% over the same period.
Analysts attribute the challenges faced by digital assets to the potential disposals of Bitcoin seized by the US government, estimated to be holding around $12 billion worth of cryptocurrency. According to blockchain data, the US government recently transferred $600 million of confiscated Bitcoin to a wallet on the exchange operated by Coinbase Global Inc. This action is perceived to exert temporary downward pressure on Bitcoin’s price.
Khushboo Khullar, venture partner at Lightning Ventures, a firm specializing in Bitcoin-linked investments, commented on the situation, stating, “Possible US government sales are resulting in this temporary downward price pressure. We expect this gap to close soon.”
The digital asset market experienced a significant downturn on August 5, marking its worst drop since November 2022, mirroring the plunge in equities caused by US growth fears and unwinding yen carry trade, which negatively impacted risk appetite globally. However, the stabilization of expectations for the US economy and the near-record level of MSCI’s global share index have signaled a more positive outlook for traditional financial markets.
In contrast to the growing interest in traditional investments, the demand for crypto exposure appears to be diminishing. This shift is evidenced by the funding rate for Bitcoin perpetual futures on the Binance exchange, the largest for digital assets. Data from CryptoQuant indicates that the funding rate, which represents the cost for the positions, is the most negative since 2022, signaling reduced enthusiasm from fast-money traders.
Bitcoin reached a record high of $73,798 in March, driven by optimism about looser US monetary policy and significant inflows into dedicated US exchange-traded funds. However, subscriptions for these seven-month-old ETFs have cooled off in recent times.
Furthermore, the volatility in US politics has also impacted the token, as the pro-crypto Republican Donald Trump and his Democratic opponent, Vice President Kamala Harris, compete in the presidential race. Notably, Harris has not yet detailed a digital-asset policy stance.
As of 7:55 a.m. on Monday in London, Bitcoin had dipped 2% to $58,630, while other major tokens, such as Ether and Solana, exhibited mixed price movements. The persistence of Bitcoin’s downward trend amidst global growth optimism presents a nuanced challenge for the cryptocurrency market, with the future trajectory remaining uncertain.
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