Why did bitcoin soar to $66,000 and how will the market continue?
The price of bitcoin (BTC), which came from several days of lateralization, had a strong upward movement in the afternoon and evening of yesterday, May 15.
As can be seen in the following graph, provided by the TradingView platform, bitcoin rose more than 4% in 24 hours. At the time of this publication, it is traded on the main exchanges for $66,341, a fact that can be verified in real time in the CriptoNoticias Price Calculator.
Inflation data in the United States is favorable for bitcoin
There are two reasons that explain the bullish movement of bitcoin. First of all, one can mention the publication of inflation data in the United States, the main world economic power. The core consumer price index (CPI) had a month-on-month increase of 0.3% and a year-on-year increase of 3.6%.
This is how this information portal announced it yesterday through its X network account (previously called Twitter):
It’s about the Lowest year-over-year inflation reading since April 2021. These figures, which suggest a cooling of inflation, are favorable for variable income assets such as bitcoin.
When inflation is lower than expected, the Federal Reserve (Fed) may be less likely to raise interest rates. Lower interest rates reduce the cost of borrowing and increase liquidity in the market, which encourages investment in higher risk assets, such as BTC.
Additionally, if inflation is low and the Fed perceives that the economy is not overheated, it may even consider reducing interest rates. Lower interest rates make the returns on traditional assets, such as bonds, less attractive, leading investors to look for alternatives with potentially higher returns (and bitcoin stands out among these alternatives).
Investment in bitcoin ETFs was reactivated
Another factor that has caused the demand for bitcoin (and, as a consequence, its price) to skyrocket is that Investment in bitcoin ETFs, which was going through a “cooling” or low interest period, has been reactivated by investors.
The following table, compiled by Farside Investors, shows the flow of money into and out of bitcoin ETFs listed on US markets. You can see there that yesterday, May 15, these financial products had a total positive flow of more than 300 million dollars:
To understand why this is bullish for bitcoin, you need to know how spot ETFs work. These investment funds, unlike ETFs based on futures contracts, are backed by the underlying asset (in this case, bitcoin). The issuing and managing companies of these investment funds They must have sufficient BTC units in their treasuries to support the financial product.
Therefore, if there is more demand for bitcoin ETFs, then, ETF managers must go to the market to buy bitcoin. This, by simple law of supply and demand, ends up causing the price of the digital currency to rise.
In recent days it has been known that Banking industry giants are investing in bitcoin ETFs. As CriptoNoticias has reported, among these are entities such as Morgan Stanley, JP Morgan, Wells Fargo and BNP Paribas.
The phenomenon expands beyond American borders. In Canada, for example, Scotia Bank, Toronto Dominion Bank and Royal Bank, among others, have diversified investments in US-issued bitcoin ETFs.
Is the bull run returning for bitcoin or will we have to wait?
If this institutional and corporate adoption continues, bullish weeks and months are expected for bitcoinwhich could go looking for new all-time highs, above $74,000.
Likewise, if historical patterns repeat themselves, bitcoin should still have a few more months of lateralization and only “shoot” upwards at the end of the year, as it usually does about 6 months after each halving.
But, if bitcoin has proven anything in this cycle, it is that its behavior cannot be predicted with 100% certainty based on what it has done in the past, so a new exception to the “rule” could be expected. There are plenty of reasons.
Regardless of what happens in the short term, In the medium and long term there is a general consensus that BTC will continue its upward path. There are several analysts who agree that BTC could reach figures greater than $100,000 between this and next year.
