As of late Monday, June 3, bitcoin was hovering around $70,600. It was sporting a seven-day gain of roughly 3.3%. It remained to be seen whether the largest cryptocurrency could earnestly break through the psychologically important $70,000 range and make a run to the record highs notched in March. But some crypto analysts believe the fundamentals are in place for such a rally to occur.
Indeed, bitcoin is a catalyst-rich story — perhaps more so than many market participants. Those potential sparks extended beyond some of the issues investors are familiar with. Those include the halving. About six weeks ago, the cryptocurrency underwent its quadrennial halving. That move decreases the rewards accrued by miners.
For a significant portion of the period immediately following the halving, bitcoin’s price action didn’t do much to excite market participants. More recently, however, the digital currency appears to be gaining momentum. It could potentially live up to historical precedent, suggesting halvings usually boost prices.
More Attractive Bitcoin Fundamentals
With the halving in the books, some crypto investors are apt to be looking for more actionable near-term catalysts. One that has near- and long-term credibility is bitcoin’s emerging utility as an inflation hedge. That’s a status long held by gold. It’s unclear if bitcoin can rival bullion on that front. But it’s clear global governments are profligate spenders.
“Amid the COVID-19 pandemic and the support for foreign wars like the War in Ukraine, government spending has exploded over the past decade. Why is increased government spending bullish for Bitcoin? Many investors see Bitcoin as a hedge against reckless spending and inflation because of its fixed supply and built-in monetary policy,” according to Zacks Investment Research.
Speaking of governments, some, along with some corporations, are increasingly bullish on bitcoin as an asset to be held long-term. Those market participants typically buy in size and hold for extended periods. That potentially serves the aim of reducing some of the volatility associated with the cryptocurrency.
“Nayil Bukele, the young president of the Latin American nation El Salvador, took the bold step of buying Bitcoin for his country and making it legal tender. After some early turbulence, the bold step is paying dividends for Bukele. El Salvador has an average price ~$40,000 on its Bitcoin holdings (Bitcoin is currently trading near $70,000). As a result, Bukele was victorious in attaining another presidential term,” added Zacks.
Closer to home, some domestic pension plans and large wealth management firms have recently established sizable positions in the spot bitcoin ETFs that debuted earlier this year. That signals professional investors are increasingly comfortable with bitcoin, and the ETF wrapper is clearly helping.
For more news, information, and analysis, visit the Crypto Channel.
