As financial markets tightened on Washington’s debt brake this week, Bitcoin rose quietly enough to get it going for its best week in months.
The world’s largest digital asset, overcoming a number of potentially negative factors that had haunted it earlier this year, is up about 10% in the last five sessions. This gain brings it to the best week since the beginning of August and completes its increase since the beginning of the year to 87%. At 2:26 p.m. in New York, it rose about 0.6% to $ 54,526.
“It’s actually pretty amazing how well done it is,” said JJ Kinahan, TD Ameritrade’s chief market strategist, over the phone. “A couple of weeks ago we had what looked like really bad news from China, with an opportunity to piss off the apple cart – and for a few days it kind of did. But it recovered quickly and continued this incredible rally. ”
Meanwhile, Shiba Inu, a cryptocurrency that was founded only last year, pulled back a little after it shot up on an Elon Musk tweet about his pup. Silvergate Capital Corp., which operates the crypto-friendly Silvergate Bank, continued to grow, increasing its two-week profit to more than 50%.
A handful of factors have been shown to be in favor of Bitcoin lately. For one, China’s recent crackdown on cryptocurrency deals, which resulted in loss last month, has been overshadowed by more optimistic news: a report from Bank of America calling the asset class too big for investors to ignore and optimism about its launch of custody services by the US Bancorp to institutional investors.
Others point to rising inflation – Bitcoin, they say, could be a good hedge given the rising prices of everything from energy to cotton to food.
“With soaring crude oil prices, soaring energy prices, and growing concerns that inflation may not be ‘transitory,’ I think this should be a major driver,” said Ben McMillan, CIO at IDX, a quantitative index fund manager. “That obviously stirs up a lot of mood for Bitcoin as a store of value, as a hedge against inflation.”
Analysts at JPMorgan Chase & Co. said in a report this week that there are now preliminary signs that the shift away from gold and towards bitcoin – something that was also seen in Q4 2020 and early 2021 – is starting again Has. emerged in the last few weeks.
“Institutional investors seem to be returning to Bitcoin, perhaps seeing it as better inflation protection than gold,” strategists such as Nikolaos Panigirtzoglou wrote in a note. The market share of the coin has increased, which the strategists see as a healthy development “as it reflects institutional participation more than smaller cryptocurrencies”.
There is a lot of recent economic data pointing to inflation, said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. “Bitcoin has really taken the place of gold in the hearts, minds and portfolios of many people, and I think what you see in Bitcoin is what you would normally see in gold, and that is the asset that is most popular best positioned to hedge you. Tackling inflation will usually do better when the public feels that inflation is more of a concern than a less of a concern. ”
Meanwhile, investors are getting more optimistic that the Securities and Exchange Commission could approve one or more Bitcoin ETFs this month. The regulator has a number of requests to consider – this time many follow a format that SEC chairman Gary Gensler has indicated could be positively received by the regulator.
“The market is starting to price in higher expectations of a futures ETF,” said David Grider, director of research at Grayscale.
Aggregate open interest in bitcoin options and futures on major exchanges has also increased 21% in the past seven days, according to data from ViewBase, a digital asset analyst. Coupled with soaring prices, this could indicate that investors may add leverage and betting prices may continue to rise, according to ViewBase.
“Creative destruction is taking place in the area,” said Steve Kolano, chief investment officer at BNY Mellon Investor Solutions, whose team manages approximately $ 30 billion. “We believe the digital currency is a trend that is likely to continue.”
Kolano cited the wave of major central banks looking into digital currencies. “It’s a trend,” he said. “This digitization is a trend that is likely to continue, changing in many ways the nature of fiat versus digital currency and the way financial transactions work.”