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Bitcoin reaches new highs while macro shows signs of potential weakness
Crypto assets continue to gain momentum, with BTC and ETH trading at their recent all-time highs of approximately $73K and $4.0K, respectively. Bitcoin has surpassed its previous record in just 469 days since reaching a low on 21st November 2022. This recovery is faster than the second and third cycles by 310 and 247 days, respectively, yet it is slightly longer than the first cycle by 9 days. BTC’s market capitalisation has now exceeded the market cap of silver, which is around $1.4T.
Turning to macro, the consecutive declines in the NFIB measure of small business sentiment, despite the stock market reaching record highs, signal potential concerns. The outlook for the labour market in the upcoming spring and summer is becoming increasingly worrisome. Inflation experienced a slight uptick in February; after eight months of declines, the core goods Consumer Price Index (CPI) saw an increase, with core services inflation continuing to run hot. Consequently, the implied probability of interest rate cuts in June is 70%, leading to further divergence between rate cut expectations and the bitcoin price. This is primarily due to ETF inflows, which recently hit the $1bn-per-day mark, cannibalising new Bitcoin issuance amid an already scarce supply, thus driving prices higher. We anticipate this strength will persist as the demand for Bitcoin in portfolios increases.
