For over two months, bitcoin has struggled below $70,000, hovering around $62,000 to $65,000. Still, experts believe that the broader macro market condition is moving in favor of the apex crypto.
Crypto exchange Bitfinex stated in its latest edition of the Bitfinex Alpha report that two of the three conditions that can support a BTC rally have been met. If successful, this can supercharge the next market phase, which is expected to be more favorable for the bulls.
Two of Three Conditions Met
The Bitfinex report outlined “lower expected rates and already-loose financial conditions” as the two conditions that have already been met.
The inflation rate fell from 3.50% in June to 3.40% in July, partly due to a drop in energy prices. It is expected that the Federal Reserve may not raise interest rates in the coming weeks. With short-term Treasury yields dropping and stocks like the S&P 500 soaring, investors have increased their appetite for risk assets.
Meanwhile, tech-focused hardware and artificial intelligence (AI) infrastructure have brought in “a separate source of supply-driven inflation.” However, this capital has failed to flow into the crypto market.
The Final Piece of the Puzzle
The Bitfinex Alpha report claims that if the capital flowing through the equities market, the tech sector, and the AI market can enter the crypto ecosystem, a price surge for the largest digital asset will naturally follow. This is what it tags as the third condition to be met for a smooth rally.
Presently, capital flow through spot Bitcoin exchange-traded funds (ETFs) has decreased. For instance, the fund lost around $385 million in weekly flow during the same week that equities like the S&P 100 soared.
Additionally, corporate Bitcoin treasuries have turned negative. Strategy, the leading BTC holder, has slowed down its bitcoin acquisitions. It even sold some of its holdings in separate weeks this year alone.
Stablecoin supply has also reduced, staying below its May record.
“In such a thin market, relatively small changes in flows could produce an outsized move in either direction,” Bitfinex explained.
This indicates that if capital flows favor the crypto market, BTC could once again attain or surpass $70,000. Conversely, a prolonged negative flow can send bitcoin to a lower support level, around $57,000.
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