In a dramatic turnaround, the Bitcoin (BTC) price has defied recent struggles and gained a staggering 6.47% in the last 24 hours. This positive trend comes amid a shift in investor sentiment regarding potential monetary policy adjustments from the Federal Reserve.
Why did Bitcoin price rise?
The catalyst for this rise appears to be a combination of many factors. The latest data from the U.S. Department of Labor showed that labor market conditions are strong. Because unemployment applications remained stable at 208,000 in the week ending April 27. This, combined with a rise in the Employment Cost Index, instilled confidence in investors and led to increased belief that the Fed could adopt a more dovish stance by the end of 2024. Bitcoin also rose by 6 percent following this development.
This change in expectations is very important. Low interest rates make fixed income investments less attractive, potentially diverting capital into riskier assets such as cryptocurrencies. Data shows market participants are increasingly betting on this scenario, with the odds of the Fed cutting interest rates below 5.00% by December 18 rising to 61%, a significant increase from 40% just a week ago.
Adjustment in M2 money supply
Adding fuel to the fire, the US M2 money supply, which includes cash, savings and short-term deposits, showed its first positive adjustment since November 2022. Historically, such increases have coincided with strong performances in the cryptocurrency market, potentially heralding a rally. There is a similar trend this time too.
Moreover, Bitcoin’s market cap currently stands at a healthy $1.2 trillion. Of the nearly $6 trillion currently parked in money market funds, even a modest 1% allocation shift could mean a significant $60 billion in funding for the cryptocurrency market. The potential for broader institutional adoption is a positive sign for Bitcoin’s long-term prospects.
What about ETF inflows?
Data from Farside Investors highlights another bullish indicator: Total net inflows into US spot Bitcoin ETFs have reached a staggering $11.2 billion since their launch in January. This strong investor interest underscores growing confidence in Bitcoin as a legitimate asset class. Although the general trend is positive, it is worth noting that Grayscale GBTC experienced a net outflow on May 2. This contrasts with broader market enthusiasm and can be attributed to the specific investment strategies used by leading firms.
Beyond immediate economic factors, renewed investor interest in Bitcoin may also be driven by doubts about the sustainability of the tech sector’s growth. Apple’s recent announcement of a massive share buyback program devoid of plans for product diversification or market expansion may encourage investors to explore alternative opportunities with high growth potential, such as Bitcoin.
Apart from Bitcoin price, other cryptos also rose
Positive sentiment has extended beyond Bitcoin, with other major cryptocurrencies posting notable gains. Ethereum (ETH) broke the $3,100 mark, while meme coins like Solana (SOL), XRP, Cardano (ADA), and even Dogecoin (DOGE) and Shiba Inu (SHIB) all saw significant gains.
Looking ahead, the recent resurgence of ETF inflows appears to be a key driver behind Bitcoin’s price rise. With continued positive economic data and a potential dovish turn from the Fed, the cryptocurrency market could be poised for a period of sustainable growth. However, investors need to be careful and do detailed research before making any investment decision.
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