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Cryptocurrency News Articles
Bitcoin Weathers Market Storms, Bolstered by Bleak Economic Outlook
Apr 27, 2024 at 03:31 am
Despite facing outflows from spot Bitcoin exchange-traded funds (ETFs) and regulatory scrutiny, Bitcoin (BTC) remained above $63,000 on April 26. These negative influences include a $218 million net outflow from U.S. spot Bitcoin ETFs and a letter from U.S. Senators seeking measures to address cryptocurrency payments for child abuse material.
Bitcoin Endures Negative Headwinds, Drawing Strength from Worsening Global Economic Outlook
Despite facing a barrage of bearish influences, Bitcoin (BTC) has remained resilient, trading above the $63,000 mark on April 26. These negative factors include substantial outflows from spot Bitcoin exchange-traded funds (ETFs), increased regulatory scrutiny, and U.S. Senators' efforts to investigate cryptocurrency transactions.
Outflows from Spot Bitcoin ETFs
On April 25, spot Bitcoin ETFs in the U.S. experienced a net outflow of $218 million, following a $120 million outflow the previous day, as reported by Farside Investors. Notably, Franklin Templeton was the sole provider to witness inflows on April 25, indicating that the trend of withdrawals is not solely attributable to high fees at Grayscale GBTC.
Regulatory Pressures
U.S. Senators Elizabeth Warren and Bill Cassidy penned a letter to the U.S. Department of Justice and the Department of Homeland Security on April 25, seeking details on measures employed to combat the use of cryptocurrency payments for child abuse material. The senators cited a report from Chainalysis and underscored the need for robust punishments for those distributing such illicit content.
Weakening Global Economic Conditions
Bitcoin bulls have drawn solace from the deterioration of global macroeconomic conditions. In the U.S., the personal consumption expenditure (PCE) increased by 2.8% year-over-year in March, exceeding the target set by the U.S. Federal Reserve (Fed). This surge in inflation, coupled with a lower-than-expected 1.6% growth in U.S. gross domestic product for the first quarter, has raised concerns among market participants.
The disappointing economic data has strengthened 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. Furthermore, recent government bond auctions have witnessed tepid investor response, resulting in the 5-year U.S. Treasury yield hitting 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 grapples with a dilemma. Lowering interest rates to ease the debt burden could exacerbate inflation, further straining consumers and businesses, leaving the Fed in a precarious position.
The macroeconomic malaise extends beyond the U.S. to other major economies. On April 26, Japan, the world's fourth-largest economy, experienced a significant devaluation of its currency, the Japanese yen, which reached its lowest level since 1990. Additionally, Japan's consumer price index for April showed a 1.8% inflation rate, 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 influence on the global economy.
Conclusion
Bitcoin's price has been adversely affected by outflows from U.S. spot ETFs, regulatory pressures, and global economic downturns. However, some analysts believe that the weakening global economic conditions may prompt central banks to introduce additional stimulus measures, which could benefit Bitcoin given its properties of scarcity and resistance to censorship.
It is important to note that this article does not provide investment advice or recommendations. All investment and trading decisions involve risk, and readers should conduct their own research before making any decisions.
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