How a Bitcoin Bump turned into a Blip
The excitement was palpable on social media from anyone who attended the Bitcoin 2022 gathering in Miami last week. Billed as the biggest crypto event of the year, the conference drew big names across the board. Special announcements were previewed. Networking was the name of the game. For a brief moment, the crypto market rallied.
Then, it slumped back. Why did what should have been a bump turn into a blip?
“Last week’s Bitcoin 2022 conference in Miami, where 25,000 people gathered to hear the latest developer pitches and glorify Satoshi Nakamoto’s invention, left attendees feeling extra bullish about the future of the original cryptocurrency,” Forbes reported.
“However, that feeling did not immediately carry over to the broader investment community. This downward shift was not what certain analysts were expecting over the last few days. In fact, some were anticipating a 2022 version of the so-called ‘Consensus Effect’ when prices of digital currencies rallied by as much as 25% in the days leading up to another annual crypto conference, Consensus, in previous years. However, absent any major announcements, tokens continued to slide as the bearish macro headwinds prevailed.”
Bearish winds, indeed.
Let’s just say it wasn’t a stellar week for crypto, as Bitcoin and other coins continued to see downward trends.
“The decline came after the 10-year Treasury yield hit a three-year high of 2.78% Monday. Riskier assets tend to fall when yields rise,” CNBC observed.
“Bitcoin and traditional markets have continued to respond negatively to expectations that the U.S. Fed will tighten its monetary policy to fight inflation, and Tuesday’s CPI release seems to be weighing heavily,” Riyad Carey, a research analyst at Kaiko, told CNBC. “Globally, the continuing war in Ukraine and increasing shutdowns in China are dragging on markets.”
Interesting point for crypto followers, who believe that the fate of Bitcoin and digital currencies in general are not tied to the traditional markets. But as trouble looms on the international front, supply chains remain disrupted, inflation continues to plague the U.S., and regulatory bodies begin to form significant crypto strategies, the fundamentals tell us otherwise.
Should we be surprised as more institutional investors have moved into the crypto space? After all, they have clients to answer to, especially in a down market.
“While long term decoupling between risk assets and crypto remains a possibility, macro trends appear to continue driving the overall market direction,” Grayscale reports in its April Newsletter. “This pattern can be seen with the increasing 90-day correlations between BTC and the Nasdaq 100 index rising above .500.”
But there’s light in this fuzzy tunnel.
“When looking at the movement of tokens on-chain, it appears that investor demand for Bitcoin is still strong,” Grayscale concluded.
Despite the recent downward trend, Bitcoin believers who attended the Miami conference remained strong in their conviction that digital currencies will prevail.
Notably, former Twitter CEO Jack Dorsey’s Block took center stage as it announced three new Bitcoin services for Cash App, its competitor to Venmo, owned by PayPal. Upgrades to Cash App were impressive enough to move Ark Investments to sell its Pay Pal holdings.
“We owned PayPal, very focused on Venmo becoming the digital wallet,” AK Investments CEO Cathie Wood said, according to Payments.com. “It will be in the running. But I think the way Cash App is growing organically, as opposed to more of a top-down, ‘Let’s get this thing moving,’ stretch-stretch-stretch.”
As you may know, Dorsey is working very hard to achieve Nakamoto’s vision of making Bitcoin a way for all people to move assets without the need for a third-party such as a bank. His vision for Cash App — “the easiest way to send, spend, bank and invest” is the new mantra that could give Venmo, PayPal and other payment apps a run for the digital money.
Despite the current headwinds, for those who attended Bitcoin 2022, it was full steam ahead.
“The world is becoming increasingly digital and we believe Bitcoin could be a perfect store of value in this future,” Glassnode concluded. “Already we are seeing a growing number of use cases in nation state reserves and cross-chain applications, showing a variety of market participants using the asset. In contrast to fiat currencies, Bitcoin’s supply is fixed, and it does not require, in our opinion, the same logistical considerations as gold reserves — mainly storage, maintenance, and protection. As more entities recognize this, we expect to see the pattern of institutions, nation states, protocol teams, on-chain traders, and casual users utilizing Bitcoin as a store of value to continue long term.”
Joyce Pavia Hanson