Key takeaways
- Bitcoin prices have bounced back since the tariff announcements.
- $100,000 may serve as a new support level.
- Investment flows into physical ETPs are increasing.
- Inflation and liquidity risks persist.
For those involved in cryptocurrency, Bitcoin breaking the $100,000 mark was a significant milestone. However, the leading cryptocurrency hasn’t managed to stabilize consistently beyond that threshold.
Since early April, Bitcoin has been on a steady rise, navigating ongoing tariff-related uncertainties that have unsettled the stock market. Following an agreement between the US and China on May 12, tariffs that previously sent the market into a tailspin were paused for 90 days, leading Bitcoin to reach its highest point in three months.
This upward trend continued, and Bitcoin hit an emotional high of $112,000 on May 22, a notable leap from $75,000 when tariffs were first introduced in early April. Nonetheless, the cryptocurrency is currently trading around $108,000.
Can Bitcoin exceed $100,000?
James Butterfill, the head of Coinshares Research, points out that from a technical view, the $100,000 mark presents a strong resistance level. He mentions, “Bitcoin is significantly above the 200, 50, and 30-day moving averages and stands out among other asset classes.”
On the other hand, Adrian Fritz, from 21Shares, argues that while there’s bullish momentum, the $100,000 level hasn’t yet proven reliable as a support level. He suggests this remains an area of contention amid broader economic uncertainties.
In trading terms, resistance refers to the price point where asset prices meet selling pressure, akin to a “ceiling.” Conversely, support is where new buyers step in, forming a “floor.” Bitcoin took a significant amount of time to surpass $100,000, and prior resistance at $60,000 was crucial in its volatile journey.
Dovile Silenskyte from WisdomTree views the $100,000 threshold as more of a psychological milestone than strictly technical. The real question is how investors will react. Will this milestone foster growth? So far, it seems that instead, $100,000 might be evolving into a new support level.
Is Bitcoin still speculative or a strategic asset?
Crypto enthusiasts have long maintained that Bitcoin might function as a store of value, especially as a hedge against expansive fiscal policies. The narrative grows stronger as more institutions allocate chunks of their portfolios to crypto. For instance, several US states, including Texas, have enacted Bitcoin laws, bringing about a state Bitcoin Reserve.
The physical ETP is seeing a notable influx, with $5 billion flowing in during April. For institutions, this isn’t merely speculative trading; it’s a strategic way to position themselves amid financial instability.
Additionally, macroeconomic conditions and supply-side pressures are playing critical roles in Bitcoin’s latest surge. Silenskyte adds that US rate cuts and persistent inflation concerns have made Bitcoin increasingly attractive as a safeguard against financial chaos.
Is Bitcoin a new safe haven?
Fritz notes that this recent rally has roots in broader economic disruptions. The US has experienced weakened Treasury ministries for two decades, compounded by Moody’s downgrading the country’s credit outlook. Meanwhile, global bond yields have surged in developed nations, reflecting inflation and concerns over debt sustainability.
While some feared this environment would trigger short-lived sales, what actually materialized was heightened demand for tangible assets. Bitcoin has been recovering alongside gold, reinforcing its emerging function as a reliable haven in times of uncertainty.
Bitcoin faces regulatory risks and liquidity shocks
The uncertainty surrounding US politics and tariffs is likely to remain a key issue going forward.
The recent pushback from a New York court hasn’t resolved tariff-related complications; the full economic implications are still unclear. This ambiguity is expected to sustain market volatility and influence monetary policy in the long run.
Fritz forecasts that Bitcoin will stabilize around $100,000, possibly flirting with $110,000 in short-term scenarios devoid of shocks. Still, inherent risks exist. He points to a fragility in the macro environment, with tariff disputes, growing global debt, and increasing yields posing real threats.
In Butterfill’s view, a revival of inflation presents the most pressing short-term risk, as it might prompt the Federal Reserve to hike interest rates. There’s also concern about potential pushback against favorable political positions on US digital assets.
The biggest unknown seems to be an unexpected shift in policy. While regulatory trends are generally becoming more positive, any sudden, politically driven changes could trigger volatility and undermine institutional confidence, according to Silenskyte.
Another area of concern is Bitcoin’s performance alongside other risk assets during tightening liquidity phases. Silenskyte warns that central banks may need to adopt a more hawkish stance than anticipated, and a sudden drop in global risk appetite could lead to sharp corrections, particularly in the crypto market.
