Main Points:
Bitcoin hit a record high of $126,200, supported by unprecedented ETP inflows of $5.67 billion.
Fiscal and geopolitical instability have reignited the “debasement trade” narrative.
Institutional investment is on the rise, while retail participation is dwindling.
Bitcoin (BTC) surged to a new record of $126,200 on Monday, following one of the most impactful weeks in digital assets, with global crypto exchange-traded products (ETPs) experiencing net inflows of $5.67 billion—marking the highest weekly total ever. This rise reflects renewed confidence among investors, driven by a reinvigorated belief in the “debasement trade” amid growing fiscal and geopolitical concerns.
According to Bitwise’s weekly crypto market compass report, the current crypto surge demonstrates how declining confidence in fiat currencies and increasing macroeconomic uncertainty are bolstering demand for store-of-value assets like Bitcoin and gold.
Director André Dragosch, Senior Research Associate Max Shannon, and Research Analyst Ayush Tripathi noted that the US Dollar Index (DXY) has dropped 10% year-to-date, while gold has surged 50%, outpacing Bitcoin’s 27% increase in the same timeframe. Many investors are now viewing BTC as a digital hedge with significant upside potential amid currency debasement fears.
Bitwise reported that spot Bitcoin exchange-traded funds (ETFs) led the inflows with $3.49 billion, followed by Ethereum with $1.49 billion, and $685 million into various altcoin products. US spot ETFs have been particularly active, with BlackRock’s iShares Bitcoin Trust (IBIT) and Bitwise’s BITB attracting most of the new investments.
Additionally, onchain data in the report indicated that over 49,000 BTC were withdrawn from exchanges by whale accounts, while positive spot buying coupled with moderate leverage suggests an advance that is sustainable rather than euphoric.
With Q4 typically favorable for market performance and liquidity trends improving, Dragosch and the Bitwise team concluded,
“Investors on either side of the store-of-value discussion may ultimately align in driving renewed capital inflows into digital assets.”
Related: Bitcoin trader calls $124K ‘pivotal’ as BTC retraces from new all-time high
Fiscal Instability Promotes Long-Term Bitcoin Growth
Bitcoin supporter Paul Tudor Jones reflected a growing sentiment that the US fiscal environment is now a crucial macro driver for risk assets. The increasing federal deficit and annual interest expenses projected to surpass $1 trillion indicate a market tilt towards continuous monetary easing, historically beneficial for BTC.
Cointelegraph reported that as foreign investors pull back from US Treasurys and the dollar weakens, a shift of capital towards “hard assets” like Bitcoin could quicken. Tudor’s reference to the late-1990s bull cycle suggests that while valuations might be elevated, the lack of exuberance and ongoing institutional investments indicate sustained momentum for the rally.
In summary, fiscal instability, expectations of dovish monetary policies, and decreasing real yields are converging to foster an environment conducive to Bitcoin’s long-term growth. However, not all onchain indicators support this view.
Bitcoin researcher Axel Adler Jr. highlighted that small transaction volumes, often associated with retail traders, have been declining since spring 2024, even as Bitcoin’s price reaches new heights.
This discrepancy between rising prices and falling retail activity suggests that the current rally may be largely driven by institutional investors, hinting at a possible fatigue among retail participants amidst Bitcoin’s bullish momentum.
Related: US Bitcoin ETFs post 2nd-highest inflows since launch on crypto rally
This article does not provide investment advice or recommendations. All investments and trading activities carry risk, and readers are encouraged to conduct their own research before making decisions.
