Bitcoin tops $60K amid Fed inflation talks: Is bull trap or $65K next?

Key takeaways:

• Persistent spot Bitcoin ETF outflows and US dollar spot trim the likelihood of a speedy bounce to $65,000.
• Strong AI assemblage net momentum and higher fixed-income returns propulsion superior from Bitcoin and gold.

Bitcoin (BTC) reacted positively to US Federal Reserve Chair Kevin Warsh's remarks connected stubborn inflation. Despite the gains connected Wednesday, traders fearfulness that incentives for fixed-income investments and beardown net momentum successful tech stocks volition proceed to unit non-yield-bearing assets similar cryptocurrencies.

US 5-year Treasury output (left) vs. Bitcoin/USD. Source: TradingView

The US 5-year Treasury output jumped to 4.22%, meaning traders demanded higher returns to clasp authorities bonds. Even arsenic ostentation yet eases and WTI crude lipid prices fell to a 4-month low, investors expect monetary expansion. Regardless of however the Fed manages involvement rates and its equilibrium sheet, the US Treasury dictates indebtedness issuance trends.

Implied likelihood of FED involvement rates connected Sept. 16. Source: CME FedWatch Tool

US authorities enslaved futures implied 64% likelihood of involvement complaint hikes by September, up from 23% 1 period prior. The higher expected instrumentality connected fixed-income investments came arsenic the US dollar strengthened against different large planetary fiat currencies, which is particularly concerning for alternate hedges specified arsenic golden and Bitcoin.

Gold/USD (left) vs. US dollar spot (DXY). Source: TradingView

Despite the gains connected Wednesday, golden prices are down 12% successful 2 months, portion the US dollar spot (DXY) nears its highest people successful 1 year. This ballot of assurance successful the US system partially stems from AI assemblage strength, evident successful the 25% gains successful the Nasdaq 100 index. However, immoderate circumstantial tech sub-sectors person precocious signaled weakness, which could enactment arsenic a catalyst for Bitcoin and gold.

Could the AI assemblage chill disconnected enactment arsenic a catalyst for Bitcoin?

Micron (MU US) and SanDisk (SNDK US) shares saw intraday losses exceeding 9% connected Wednesday aft competitors SK Hynix (000660 KR) and Samsung (005930 KR) announced plans to grow capacity. Still, the determination tin hardly beryllium deemed a inclination reversal arsenic the iShares SOX Semiconductor Index ETF (SOXX US) gained 78% successful 3 months.

Continued outflows from US-listed spot Bitcoin exchange-traded funds (ETFs) person shattered bulls’ hopes, reinforcing a antagonistic terms spiral arsenic antagonistic quality gets amplified portion affirmative events hardly register. 

US-listed spot Bitcoin ETFs regular nett flows, USD. Source: SoSoValue

Regardless of the rationale down the sales, Bitcoin’s weakness, 53% beneath its all-time high, does not animate assurance successful the $60,000 enactment level.

Strategy (MSTR US) increased its currency position to reconstruct a steadfast 17 months of dividend sum connected Monday. However, Strategy’s variable-rate Stretch preferred banal (STRC US) continued to commercialized acold from the $100 people required for further issuances. The STRC dividend roseate to 12% from 11.5%, which was seemingly not capable to entice much buyers.

Related: Bitcoin conscionable $5K distant from ‘best concern opportunity’ of carnivore market

Bitcoin mightiness person temporarily benefited from Fed Chair Warsh’s concerns astir persistent inflation, but rising expectations for higher involvement rates and beardown net momentum successful the AI assemblage whitethorn proceed to exert antagonistic unit connected Bitcoin. As a result, a sustainable rally to $65,000 could instrumentality longer.