Bitcoin: Unveiling the Resilient Market Dynamics
According to Meltem Demirors, the chief strategy officer at CoinShares, two crucial elements fuel the present market resilience of Bitcoin.
According to a recent interview on Bloomberg Television, Demirors dismisses the notion that the US banking crisis is the primary cause of Bitcoin’s price movements in recent months, stating, “I don’t believe it’s solely due to the banking crisis or a lack of confidence in the banking sector.”
Instead, Demirors credits Bitcoin’s upward trajectory to two primary drivers: a resurgence in investor risk appetite and the anticipation of the upcoming halving event in April next year, leading to a 50% decrease in miners’ rewards.
She explains:
“Across all markets, investors seem comfortable with taking on risk, regardless of the macro environment or concerns about interest rates. Additionally, we are entering a new crypto cycle, with the upcoming Bitcoin halving on the horizon. There is also increased exposure to cryptocurrencies through derivatives trading.”
Demirors highlights that Bitcoin’s correlation with global equities has significantly decreased, stating, “The correlation between Bitcoin and global equities has reached its lowest point in quite some time, hovering around 12%.”
Regarding the Federal Reserve’s recent interest rate hike aimed at curbing inflation, Demirors believes it will not hinder Bitcoin’s performance. However, she notes that the high-interest rates are impacting decentralized finance (DeFi) projects, saying, “I don’t believe it poses a problem specifically for Bitcoin.
Instead, we are observing a slowdown in the decentralized finance (DeFi) sector, where people have traditionally seen higher yields from lending stablecoins or on-chain dollar equivalents.
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Yields on stablecoins in various DeFi applications have declined significantly, now ranging from 2% to 3%, while low-risk Treasury Bills offer 4% to 5% yields. This presents a greater challenge.
As a result, we have seen a decline in on-chain activity, with Bitcoin and Ethereum experiencing a decrease of approximately 15% and stablecoin activity and volumes dropping by around 40% on both networks, as they are the primary trade pair for most crypto derivatives.”
In summary, Demirors believes that Bitcoin’s recent market strength stems from investors’ increasing risk appetite, the anticipation of the upcoming halving event, and a diminished correlation with global equities.
She does not perceive the Federal Reserve’s interest rate hike as a hindrance to Bitcoin’s performance but notes its impact on the DeFi sector, leading to reduced yields and a decline in on-chain activity.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
