Bitcoin has had a good few weeks. In mid-August, BTC experienced a bounce after a couple of sleep months stuck in the doldrums. Coinshares Senior Portfolio Manager Marc des Ligneris see renewed investor interest as partially driven by the US Department of the Treasury’s bond buying activity. At the same time, he reminds everyon that Bitcoin has still not recovered from its previous highs.
“By doubling its purchases of long-term debt securities outside the usual refinancing schedule, and thereby departing from the principle of “regularity and predictability,” the US Treasury has helped awaken Bitcoin from its recent slumber,” says des Ligneris, tying this activity to a sharp rebound in price, amplified by a significant shorts and limited hedging activity.
“ETF inflows have also been substantial,” adds des Ligneris, while posing the question as to how the much has the market “re-exposed itself” to Bitcoin.
“A significant portion of ETF inflows has instead been used to rebuild carry-trade positions, taking advantage of the sharp increase in the CME futures basis. As a result, the massive outflows recorded in June and July are still far from being fully reversed, and genuine market re-exposure remains relatively marginal.”
des Ligneris predicts that this weeks inflation data will drive Bitcoin activity as the numbers will have impact on this month’s Fed decision.
“Following the strong employment figures, the balance of expectations is currently tilted towards a rate hike. However, the Treasury’s strategy of concentrating US debt issuance at the short end of the curve is increasingly turning monetary policy into a variable for managing the cost of debt refinancing. Over the medium term, this creates additional pressure for short-term rates to remain lower for longer.”
The price of oil can be blamed for much of the rise in prices says des Ligneris and the war with Iran does not currently have any light at the end of the tunnel.
“Any easing of tensions on this front would therefore likely have a meaningful impact on the outlook for US monetary policy and then for Bitcoin.”
Last October, Bitcoin hovered around the $125,000 price point so BTC has a ways to go to break out from its 52 week high.
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