The surge in Bitcoin’s value by 7.6% to $72,000 between April 6 and April 8 likely wasn’t solely due to the purchase of $500 million in Bitcoin by the Ethena’s stablecoin USDCe as collateral, as some might assert. Rather, it appears that a combination of macroeconomic factors played a significant role in driving this rally.
Firstly, it’s essential to consider the broader economic landscape and investor sentiment. Periods of increased liquidity and monetary policies aimed at stimulating consumption and growth often benefit scarce assets like Bitcoin. In times of persistent inflation and economic uncertainty, investors tend to seek out assets perceived as stores of value, which can include cryptocurrencies like Bitcoin. Jamie Dimon, the CEO of JPMorgan Chase, mentioned in a shareholder letter that the resilience of the U.S. economy might result in “tickier inflation and higher rates than markets expect,” according to Yahoo Finance. This perspective sheds light on why exchange-traded funds (ETFs) tied to gold are commanding higher prices in China, as investors prepare for potential inflation amidst concerns over the United States’ unstable fiscal debt scenario.
According to Eric Balcunhas, a senior ETF analyst at Bloomberg, Chinese investors are “desperate to buy assets unlinked to their own economy/stock market”. This demand has caused gold ETFs to trade at a premium of 30% above their estimated fair value in China. Additionally, the U.S. government’s deficit has been stretched further by a $1.2 trillion spending package passed on March 23, along with President Joe Biden’s proposal to forgive up to $20,000 of student debt for 23 million borrowers, irrespective of their income. These developments have intensified concerns regarding the sustainability of fiscal policies.
Additionally, escalating trade tensions between the U.S. and China may have contributed to increased interest in both gold and Bitcoin as hedges against geopolitical risks. The surge in gold prices coinciding with discussions of potential tariffs on Chinese products highlights the role of geopolitical factors in shaping investor behaviour.
Overall, while specific events such as the purchase of Bitcoin by the Ethena’s stablecoin may have contributed to short-term price movements, the broader macroeconomic context suggests that factors such as inflationary pressures, geopolitical tensions, and fiscal policies likely played a more significant role in driving Bitcoin’s surge to $72,000.