Bitcoin rally could be a mirage, writes our Analyst – a Deep Dive

Key  Takeaways

• Bitcoin is up nearly 50% thus far this year, but there have been no positive catalysts from within the industry
• Rally is nothing but macro-driven, writes our Analyst, with Nasdaq up 16% and Bitcoin continuing to trade like a levered bet on the index 
• There are many headwinds still present, the latest being the potential regulatory clampdown, such as the BUSD shutdown this week
• Bitcoin – and crypto – remain vulnerable to these factors, and despite the recent rally is still 65% off highs with many questions still unanswered

What do the below things have in common?

• Crypto lender Genesis files for bankruptcy
• Parent company DCG announces it is to sell off crypto assets at a discount
• Layoffs surge, including Coinbase, crypto.com, blockchain.com
• SEC sues the issuer of Binance’s stablecoin, BUSD, with the coin to gradually wind down
• Regulatory clampdown fears rise off back of BUSD case, most predominantly for world’s second largest stablecoin, USDC

They are all negative news events, that’s what. And yet, despite these headwinds, the crypto market is on an absolute tear thus far this year. Bitcoin is now staring down the barrel at $25,000 for the first time since August 2022.

Were all the bearish catalysts priced in? Maybe. One could certainly argue that prices incorporated the DCG and Genesis issues in the immediate aftermath of the FTX collapse in November. The BUSD story was certainly a surprise, however. Then again, should that really impact markets? Maybe not. 

The big crypto-specific story is the looming threat of regulation and the fears surrounding projects like USDC, the stablecoin that carries a $41 billion market cap. The concern around securities laws was first triggered last week when crypto exchange Kraken was issued with a $30 million fine in relation to staking products it offered.  

To frame it a different way, has cryptoland seen viable reasons to jump up to this extent? Bitcoin is now up 48% on the year. Where has the good news been?

Crypto is rising for one reason only 

The answer may not be the romantic one, but it’s macro. Inflation readings have softened, with the market moving towards an expectation of a Fed pivot off tight monetary policy sooner than was previously anticipated. 

The market, whether you agree or not, is now positioning itself as if…