Bitcoin continues to trend to the upside over the short term as the crypto market hints at further gains. The bullish momentum seems to be driven by the positive earnings seasons and the U.S. Federal Reserve (Fed) interest rates hike.
The financial institution announced a 75 basis points (bps) increase in interest staying within market expectations. Bloomberg Intelligence’s Senior Commodity Strategist Mike McGlone believes the Fed might have marked the pivot for Bitcoin.
By staying within market expectations, the financial institutions might give room for the bullish trend to expand in the coming months. The Fed has been trying to mitigate inflation in the U.S. dollar, as measured by the Consumer Price Index (CPI).
This metric stands at a 40-year high but seems poised to trend downwards. The Bloomberg Intelligence analyst claims the price decrease across the commodities sector hints at this possibility and could provide the Fed with the support to “lighten the rate hike sledgehammer”.
This would benefit stores of value assets, such as Gold, U.S. treasury bonds, and Bitcoin. The cryptocurrency has been suffering, McGlone argues because it’s deemed a nascent asset with relatively new technology.
This disadvantage might fade into the background as Bitcoin’s adoption curve increases versus its total supply. As seen below, if the cryptocurrency follows the internet’s adoption curve, it could record over 1 billion users by 2025.
BTC’s adoption curve compared to the internet. Source: Visbitcoin via Michael Levin
In the short term, BTC’s price might benefit from mitigation in the macro-economic factors playing against it. The next major event will be July’s CPI print to be announced in August, which might result in more fuel for the current bullish price action. McGlone wrote:
(Fed’s) “meeting by meeting” comment may mark the pivot for #Bitcoin to resume its tendency to outperform most assets. New and untested are becoming past tense fast for the benchmark crypto, likely in the early recovery days from a severe drawdown.
Can Bitcoin Resume Its “Propensity To Outperform”?
Further data provided by McGlone shows a decrease in BTC’s price 250-day volatility versus the Bloomberg Commodity Spot Index. As seen below, whenever this metric trends downside, the price of Bitcoin reacts moving in the opposite direction.
BTC’s price volatility declines versus Bloomberg Commodity Index hinting at potential price appreciation. Source: Bloomberg Intelligence
A decline in BTC’s price 250-day volatility marked the beginning of the 2012 and 2017 rallies. In that sense, McGlone pointed out:
The lowest-ever Bitcoin volatility vs. the Bloomberg Commodity Index (BCOM) may portend a resumption of the crypto’s propensity to outperform (…). If history is a guide, Bitcoin volatility is more likely to recover vs. commodities when the crypto heads towards new highs.