Bitcoin (BTC) held above $63,000 on April 26 despite facing a slew of negative influences. These include significant outflows from spot Bitcoin exchange-traded funds (ETFs) over two days, heightened regulatory scrutiny marked by a United States Federal Bureau of Intelligence warning against unregistered crypto services, and efforts by U.S. senators to scrutinize cryptocurrency transactions.
On April 25, spot Bitcoin ETFs in the U.S. saw a net outflow of $218 million, which followed a $120 million outflow the previous day, as reported by Farside Investors. Notably, Franklin Templeton was the only provider to record inflows on April 25, indicating that the withdrawal trend cannot solely be attributed to high fees at Grayscale GBTC.
U.S. Senators Elizabeth Warren and Bill Cassidy sent a letter on April 25 to the U.S. Department of Justice and the Department of Homeland Security. They sought details on measures being employed to tackle the issue of pseudonymity in cryptocurrency payments for child abuse material. The senators referenced a report from Chainalysis and emphasized the need to punish those selling such illicit content.
Bitcoin can ignore negative economic forecasts
Bitcoin bulls are drawing optimism from deteriorating global macroeconomic conditions, particularly after the U.S. Personal Consumption Expenditures (PCE) increased by 2.8% year-over-year in March. This rise in inflation, which surpasses the target set by the U.S. Federal Reserve, is particularly alarming given that U.S. gross domestic product (GDP) growth for the first quarter was lower than expected at 1.6%.
These figures bolster market expectations that the Fed will maintain higher interest rates for an extended period, as reported by CNBC. George Mateyo, chief investment officer at Key Wealth, noted, "The prospects of rate cuts remain, but they are not assured, and the Fed will likely need weakness in the labor market before they have the confidence to cut."
According to Lawrence MacDonald, founder of “The Bear Traps Report,” interest payments as a percentage of federal spending in the U.S. are projected to increase to 12.3% in 2024, up from 9.8% in 2023. Additionally, recent government bond auctions have shown a tepid response from investors, resulting in the five-year U.S. Treasury yield reaching its highest levels in nearly six months on April 25.
Bitcoin investors are wary of the unsustainable trajectory of U.S. government fiscal policies as the Fed faces a dilemma. Lowering interest rates to alleviate the debt burden could lead to higher inflation, which would further strain consumers and businesses, leaving the Fed in a precarious position.
The deteriorating macroeconomic conditions extend beyond the U.S. to other major economies. On April 26, Japan, the world’s fourth-largest economy, witnessed a significant devaluation of its currency, the Japanese yen, reaching its lowest level since 1990. Additionally, Japan’s Consumer Price Index for April showed a 1.8% inflation rate, which was lower than expected, casting doubts on consumer strength, as reported by Reuters.
A user on the X social network, Geiger Capital, pointed out that the Bank of Japan (BOJ) is constrained from raising interest rates due to the country’s staggering 265% debt-to-GDP ratio. While a weaker yen benefits exports, it adversely affects domestic consumption. Crucially, as the largest holders of U.S. Treasurys, Japanese investors’ movements exert considerable pressure on the global economy.
Ultimately, Bitcoin’s price has been negatively affected by outflows from U.S. spot ETFs, regulatory pressures and global economic downturns. However, some analysts believe that the weaker global economic conditions may lead to additional stimulus measures by central banks, which could be beneficial for Bitcoin given its properties of scarcity and resistance to censorship.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.