• Bitcoin price tops $68,000, but a few concerning headwinds remain
• Weak global real estate sectors, especially in China, impact investors’ expectations
• Bitcoin’s limited adoption and pressure from Grayscale’s Bitcoin Trust holdings firm are concerning factors
Bitcoin has topped $68,000 recently, showing continued strength as investors anticipate monetary expansion by the Federal Reserve. However, concerning global macroeconomic factors persist.
Demand Driven By Anticipated US Monetary Expansion
Bitcoin’s 51% year-to-date gains likely reflect investor expectations of US monetary expansion. With the Fed needing to inject liquidity to support banking or stimulate the economy, investors often turn to scarce assets like Bitcoin for protection.
The broader US monetary base (M2) surpassed $20 trillion in April after contracting since April 2022. This increase suggests rising inflationary pressure despite current hesitation to spend.
However, the Fed may also restrain the economy while lowering rates, slowing M2 expansion for a soft landing.
Weak Global Real Estate Sectors Threaten Investor Confidence
Several external factors weigh on Bitcoin’s price. On May 17, China announced plans to address its troubled real estate market, underscoring economic downturn risks given the sector’s fragility.
The intervention is seen as limited, so investors remain skeptical it will resolve the issue. Beyond China, commercial real estate faces a balance sheet crisis per Barry Sternlicht, CEO of Starwood Capital. He predicts failures of North American banks.
Limited Bitcoin Adoption and Pressure From Grayscale
Bitcoin’s limited real-world use means it is not a primary recession hedge. Grayscale‘s parent Digital Currency Group was affected by the Genesis bankruptcy, so there are concerns about GBTC fund liquidations negatively impacting price.
In summary, while anticipated Fed action and recession risks could benefit Bitcoin, limited adoption and external pressures like real estate and Grayscale weigh on its price. Macroeconomic uncertainty persists.
