Two Main Catalysts Are Driving Bitcoin’s (BTC) Current Price Action, According to CoinShares’s Top Strategist

CoinShares chief strategy officer Meltem Demirors is identifying two main catalysts behind Bitcoin’s (BTC) current market strength.

In a new interview with Bloomberg Television, Demirors discounts the US banking crisis being the main cause behind Bitcoin’s price action in recent months.

“I don’t think it’s the banking crisis or the lack of confidence in the banking sector necessarily.”

Instead, Demirors believes there are two main catalysts giving Bitcoin a boost: investors regaining an appetite for risk and the anticipation of next year’s halving event in April when miners’ rewards are cut in half.

“I think what we are seeing is across all markets is investors, despite the macro environment and concerns about rate hopes, are still fairly comfortable buying risk.

And I think we are going into a new crypto cycle. We have a Bitcoin halving coming up. We’re seeing a lot of exposure via the derivatives side of the market.

So I think it’s not just the banking crisis in particular in focus here, but it’s really a broader appetite for risk and investors perhaps getting comfortable reallocating and continuing to be exposed to crypto.”

She also notes that Bitcoin’s price correlation with global equities has declined significantly.

“Bitcoin’s correlation with global equities is down to its lowest in some time, hovering at around 12%.”

Weighing in on the Fed’s latest interest rate hike intended to draw down inflation, Demirors says it shouldn’t impede Bitcoin’s performance. However, she says the high-interest rate appears to be impacting decentralized finance (DeFi) projects.

“I don’t think it’s a problem for Bitcoin specifically. I think where we’re seeing more of a slowdown is in the decentralized finance or DeFi landscape where people are historically accustomed to seeing yields on lending out stablecoins or on-chain dollar equivalents. And what we’ve seen there is yields on stablecoins in different DeFi applications are down quite a bit.

You’re getting about 2% to 3% whereas a Treasury [Bill], a fairly low-risk to risk-free asset, is yielding 4% to 5%. It just makes it much more challenging. And we’ve seen that reflected in the numbers. On-chain activity for Bitcoin and Ethereum in particular, down around 15% in the month of April, stablecoin activity and volumes down closer to 40% on both the Bitcoin network and Ethereum network, that’s the predominant trade pair for most crypto derivatives. So we are seeing a decline in on-chain activity.”

Generated Image: Midjourney

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