3 reasons why Bitcoin failed to break above $72K

Bitcoin (BTC) saw a 5.9% gain between June 2 and 5, but its rally was halted at $71,746. This move was supported by nearly $1 billion in inflows into US-listed Bitcoin spot exchange-traded funds, indicating strong demand from institutional investors.

Bitcoin’s bullish momentum was also fueled by the significant growth in unrealized losses in the US banking sector. However, despite favorable conditions, including a more crypto-friendly stance from US lawmakers, Bitcoin was unable to surpass $72,000.

Regulatory uncertainty persists despite positive developments

According to Bitwise Chief Investment Officer Matt Hougan, regulatory uncertainty has prevented financial advisors from increasing their crypto exposure. Nonetheless, Hougan believes the United States is moving toward clearer regulation, a shift that began when Democrats voted to repeal the U.S. Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 .

The SEC’s approval of spot Ethereum ETFs is another sign that U.S. regulators are less inclined to tackle anti-crypto litigation after multiple court losses, including the conversion of Grayscale’s GBTC Trust into a regular ETF. However, Bitwise’s Hougan notes that US President Joe Biden’s veto of the repeal of SAB 121 shows that “crypto still has a long way to go.”

According to a report from the Federal Deposit Insurance Corporation (FDIC), U.S. financial institutions are currently suffering $517 billion in accounting losses due to the impact of rising rates on their residential mortgage-backed securities. The report, released on May 29, said 64 banks were on the brink of insolvency in the first quarter of 2024.

Bitcoin Price Could Fall Ahead of Negative Macroeconomic Events

BitMEX co-founder Arthur Hayes argued that the most likely solution would be to “print more money,” which is exceptionally favorable for scarce assets like Bitcoin. According to Hayes, Bitcoin’s 43% 30-day rise that began in March 2023 was triggered by the collapses of Silicon Valley Bank and Silvergate Bank. A similar trend could repeat itself in 2024.

However, even if this theory is correct, i.e. the US Federal Reserve will inject liquidity into the system to avoid widespread bankruptcy or ease pressure on the banking system via repurchase agreements and credit lines specials, there is a good chance that the price of Bitcoin will fall first if the stock and bond markets suffer.

Before launching the rally in March 2023, Bitcoin price fell to $19,559, the lowest in almost two months. At the time, this move reflected the same uncertainty that caused the 2-year U.S. Treasury yield to fall from 5.07% to 3.98%, which is extremely unusual and indicates that traders were willing to cut their yield to have the security of having an asset guaranteed by the government. .

Therefore, investors could expect a price correction ahead of Bitcoin’s eventual rally, although there is no guarantee that the 2023 trend will repeat, especially with the excellent inflow history recurring Bitcoin spot ETFs in the United States, accumulating more than $52 billion. since its launch in January.

Related: Bitcoin Halving Impacts Riot Miner’s Revenue by 43% Despite New Facility

Stock market success is not intrinsically positive for Bitcoin

Also worth considering is the stellar performance of U.S.-listed tech stocks, including NVidia (NVDA), which helped the S&P 500 Index reach an all-time intraday high of 5,342 on June 5. UBS analysts expect the Fed to cut rates twice. this year, creating a “healthy backdrop for stocks,” as CNBC reports.

Although it does not compete for the same price as Bitcoin, strong stock market performance reduces incentives for alternative assets. GameStop’s (GME) 32% weekly surge, sparked by influencers and social media posts showing “Roaring Kitty” gains topping $85 million, could also negatively impact traders’ interest in cryptocurrencies.

In short, there is nothing stopping Bitcoin from hitting a new all-time high in 2024. However, as long as investors remain comfortable with fixed income and stock market traders, there is less incentive to exceed $71,000 in the short term.

This article is intended for general information purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.