Investors in the cryptocurrency space are seeing renewed confidence in Bitcoin, reflected by the rising holdings of digital asset funds. Analysts note that the demand for Bitcoin was bolstered by the U.S. Federal Reserve’s halt in its rate hike cycle which has been up for discussion since the bank failures of early March. With the future uncertain and investor faith low, the CME FedWatch Tool suggests that 58 percent of traders don’t expect the Fed to raise rates again in its next meeting on May 2021.

Meanwhile, James Butterfill, the head of research at European digital asset manager CoinShares commented that “...it still isn’t clear if the Fed’s bailout program has stemmed the run on banks.” He suggests that the Fed “has only kicked the can down the road and that the Fed is stuck between not raising rates and causing an inflation problem, or raising rates and causing a banking crisis.” This uncertainty has meant investors holding out for more data which in turn reflects the bullish sentiment around Bitcoin.

A recent crypto analytics report from CryptoQuant affirmed this sentiment, with bitcoin holdings increased from 688,000 bitcoins pre-March to 692,000 as of April 2. This means an additional 4,000 bitcoin or close to $20B worth of bitcoin, based on the market price. CryptoQuant Analyst Grizzly commented on the return of ‘trust’ in Bitcoin, suggesting that “This is Bitcoin's first significant test in the face of a severe crisis.”

It appears that the demand for bitcoin is on the rise, as the scaling economic crisis brings cryptocurrencies to the forefront as a safer, digital store of value and hedge against inflation. As the crisis gathers momentum, more investors are gaining confidence and turning to Bitcoin, making digital asset funds the main beneficiaries. Reassuringly, the trust in Bitcoin is back, with CryptoQuant analysts noting with mirth that this is the cryptocurrency’s ‘first significant test in the face of a severe crisis’. Federal Reserve’s rate hikes were also factored in, with the CME FedWatch Tool indicating that only 58% of traders believe that the rate won’t be increased at the next FOMC meeting in May.

Overall, the crypto space is seeing promising signs of attaining the trust it had previously lost. Whether this surge in demand is a sign of something more, or simply a ‘wait and see’ approach by investors, the demand indicators point to Bitcoin continuing its bullish trend.



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