ByteFolio Issue 86;
Why are Bitcoin and crypto so strong? The quick answer is the outlook for lower rates, which has weakened the dollar, but there鈥檚 always more to it. We haven鈥檛 had enough rate cycles to be sure, but rate expectations have turned down, and Bitcoin has rallied, just like it did in 2019. But there are other factors, such as April鈥檚 halving, the spot ETF launch, and above all, we seem to have run out of scandals. It all comes together nicely.
Bitcoin and Rates
But it鈥檚 also important to understand that Bitcoin surged in 2020 and 2021 when bond yields rose sharply. That鈥檚 because it was a risk-on environment, just like in 2016/7. Spurious correlations, perhaps, because it seems to work both ways. But perhaps rates aren鈥檛 that important because they only seem to matter at extremes, i.e. when crypto is either too hot or too cold. After last year鈥檚 hell, it was too cold, but with Bitcoin now above $40,000, it is surely closer to neutral.
Checking in on the deviation from the 90-day moving average, it鈥檚 +49% over. But then, considering the 5-year average is +36%, it鈥檚 not too bad. Plenty more to go yet!
Not Exactly Overbought
