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Market Recovery Amid Geopolitical Tensions
Recent market activity has shown a rebound following the ceasefire in the conflict between Iran and Israel, commonly referred to as the 12-Day War. Bitcoin saw a notable increase, rising by 2.75% to reach US$107,515 (approximately AU$164,062) over the past week. However, most alternative cryptocurrencies (altcoins) have struggled to mirror Bitcoin’s performance, with many remaining slightly down on both daily and weekly charts. The current Fear and Greed Index indicates a sentiment of greed among investors, suggesting that concerns surrounding Middle Eastern tensions are being largely overlooked at this time.
Prospect of New Bitcoin Highs
The key question facing the cryptocurrency market is whether Bitcoin can achieve a new all-time high, a move likely to benefit altcoins as well. Analysts at Glassnode have reported that the market is currently in a “holding pattern” due to diminishing momentum, emphasising the need for a resurgence in demand and trading activity to facilitate any upward movement. They suggest that while the market structure is supportive, a breakthrough to new highs will necessitate a noticeable increase in market activity:
"While structure remains supportive, a breakout to new highs will likely require a clear pickup in demand, activity, and conviction." — Glassnode
Growing Institutional Interest in Bitcoin
In recent times, a trend has emerged where institutional investors are driving the demand for Bitcoin, often at the expense of retail investors. Many companies have started adopting a strategy similar to that of Michael Saylor, utilising Bitcoin as a treasury asset. Notably, an Australian biotech company listed on the ASX recently added two bitcoins to its holdings.
In the realm of investment vehicles, US spot Bitcoin exchange-traded funds (ETFs) have experienced significant inflows, with no net outflows since 6 June. Just on the most recent trading day, the sector saw an addition of US$63 million (AU$96 million). Significant contributions from the BlackRock IBIT ETF—adding over US$1 billion (AU$1.5 billion) since the start of the week—have played a key role in this positive trend. Combined, all US funds now hold approximately 5.9% of the total Bitcoin supply, which translates to over 1.23 million BTC.
Current balance of each US Bitcoin ETF, source: BiTBO/Highcharts.com
Market Sentiment Boosted by Easing Geopolitical Tensions and Potential US Rate Cuts
From a broader macroeconomic perspective, market sentiment seems buoyed by easing geopolitical tensions. Paul Stanley from Granite Bay Wealth Management remarked that the reduction in conflict has contributed positively to investor confidence:
"The market is betting on continued progress on trade, and a de-escalation of tensions in the Middle East is giving investors confidence." — Paul Stanley, Granite Bay Wealth Management
Additionally, the US Federal Reserve has indicated cautious optimism regarding the potential inflation impacts of tariffs instituted during the Trump administration. Recent statements from Fed officials suggest that the anticipated inflationary effects may not materialise as strongly as once feared, which could pave the way for interest rate cuts in the near future. Some officials have even hinted at the possibility of rate reductions happening as early as the next meeting, while others anticipate at least one cut in 2025.
In conclusion, while Bitcoin appears to be benefiting from both institutional interest and a temporary reprieve from geopolitical tensions, the sustainability of this recovery will depend on a reinvigorated market activity and demand. Investors will be closely monitoring these developments as the landscape continues to evolve.
