Despite strong year-to-date price appreciation over 77% and a mid-April $30k peak for Bitcoin after the frosty crypto winter of 2022, BTC and general crypto-wide performance has broadly lagged since late March of this year. That may be all about to change on the tail of recent Federal Reserve rate hikes, a projected friendlier macro environment, and current events that play squarely to the inherent strengths of the world’s #1 cryptocurrency.
On Wednesday the Fed signaled its commitment to shrinking inflation with yet another 25 basis-point rise to the federal funds rate. Despite this, as is often the case, markets at least in-part took the action not as a marker of continued economic challenge, but instead as a harbinger of an inevitable pivot to avert recession. As a result, crypto rose slightly, and stocks, banking sector aside, dipped then recovered to avoid any particularly significant decline.
The market interpretation is not entirely unfounded – CME Group’s FedWatch probabilities indicator agrees, suggesting “no change” as the most likely state of rates for June and July, followed by a 75% chance of slashing in September. This would conveniently occur when approximately six to eight months remain before the renowned Bitcoin halving event, a historical signal of eye-watering crypto bull runs to come. These tend to last approximately 18 months and culminate with blowoff tops, memes (already begun), and NFT mania of epic proportion.
Of course, such charges are always led and must be affirmed by Bitcoin, the asset to which all crypto liquidity is tied, and thus by which all digital currency price action is guided, whether we like it or not. Thankfully, beyond just reverse-psychology interpretation of Federal Reserve behavior, recent news of bank failures that spooks traditional markets simply emboldens Bitcoin’s entire raison d’etre. Beyond broad investor sentiment, there remains no technical reason why a decentralized, trustless, and peer-to-peer store of value is required to move in price alongside its polar opposite. In fact, when it comes to the dollar, Bitcoin’s tendency has been to do just the reverse.
When banks become illiquid or fail, but rate hikes and credit squeezes mean money printing can’t save the day, Bitcoin remains 100% backed by computational power and the perpetual hard energy (approximately 127 TWh yearly) required to mine it. From a broad view, it doesn’t particularly matter what the news cycle throws at Satoshi Nakamoto’s invention, as price has historically and consistently followed hash rate, and the mathematics and incentives of the Bitcoin protocol ensure this phenomenon can continue.
If 2008-like events continue to unfold with regard to the banking sector, investors and holders of currency in general may have a decision to make. Who do you trust – financial institutions stuck holding government debt, the government itself with its steadfast but limited FDIC, or the ability to hold an asset that requires you trust nobody at all? While proclamations of an imminently failing U.S. dollar may often be hyperbolic, the history and average lifespan of fiat currency is clear, suggesting at the very least, USD and some of its modern brethren may be living on borrowed time.
Bitcoin reaching $30k this market cycle has been described as a key battle line, and once this resistance becomes support, most signs suggest Bitcoin will proceed to do what it has always done. As the saying goes to describe the Bitcoin network’s unconcern for the ongoing mania of current events: tick-tock, next block.
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