Bitcoin’s $72K Surge: More Than Just ETF Inflows

Bitcoin experienced a significant increase in value, rising by 7.6% between April 6 and April 8 and reaching a peak of $72,747. This surge led to speculation about the reasons behind it, with some suggesting that it was due to inflows from spot Bitcoin exchange-traded funds (ETFs). There are broader factors at play that likely contributed to Bitcoin’s recent price rally.

It is unlikely that the surge in Bitcoin’s value was solely due to the purchase of $500 million in Bitcoin by the Ethena stablecoin USDCe as collateral. Previous instances, such as MicroStrategy’s acquisition of Bitcoin valued at over $600 million, did not prevent a subsequent drop in BTC price. Inflows of this scale are relatively insignificant compared to Bitcoin’s daily spot volumes of over $10 billion.

Investor expectations regarding the economy and the cost of capital also play a role in driving Bitcoin’s price higher. In times of increased liquidity and monetary policies aimed at stimulating consumption and growth, scarce assets like Bitcoin tend to benefit. This trend is particularly pronounced during periods of persistent inflation.

There are concerns about rising inflation, particularly given the U.S.’s fiscal debt situation. Jamie Dimon, CEO of JPMorgan Chase, has warned that inflation and interest rates may be higher than expected. This has led to increased interest in gold ETFs in China, as investors seek assets that are not linked to their own economy and stock market.

The U.S. government’s deficit has been further strained by recent spending packages and proposals for student debt forgiveness. These factors contribute to concerns about fiscal sustainability and could potentially precipitate an economic downturn. It is difficult to predict how investors will react to these occurrences, given Bitcoin’s fluctuating correlation with traditional assets.

Trade tensions between the U.S. and China may have also contributed to increased interest in both gold and Bitcoin. Gold prices reached a record high on April 8, coinciding with an increase in the U.S. Treasury yield. This suggests that investors may be seeking a hedge against deteriorating global economic relations and the consequences of U.S. government stimulus initiatives.

The surge in Bitcoin’s value to $72,000 on April 8 is likely driven by a combination of factors, including investor expectations, concerns about inflation, trade tensions, and economic stimulus initiatives. It is not solely reliant on sporadic Bitcoin inflows from specific investors.