Investors Aren’t Decentralized
Ultimately, a completely decentralized asset is not all that likely to exist in the current day. Anyone who invests in Bitcoin still lives their day-to-day life in a society that operates on traditional economic systems. Investors must react to the market to stay afloat or get ahead. Though Bitcoin is designed to be detached from institutions and traditional currencies, investors still use these methods to acquire the digital asset in the first place.
Macroeconomic Factors Influencing Bitcoin
As such, even Bitcoin is impacted when a currency experiences inflation, when an institutional or national interest rate changes, or the world experiences a broad shift in liquidity. In recent weeks, global trade uncertainty impacted the world economy—particularly in the United States—and crypto responded accordingly, falling to just over 77,500 on April 7.
“Bitcoin’s label as a ‘digital gold’ has been put into question in months prior,” Jessica Penny wrote for InvestorDaily, “as the world’s largest cryptocurrency was swept up in the broad market risk sell-off. But its current divergence from equity markets throws a bit of a spanner in the works.”
However, as some policies were walked back recently, Bitcoin has reacted positively and climbed close to the $100,000 mark as of writing.
“On the upside, immediate resistance is near the $95,250 level,” Aayush Jindal wrote for NewsBTC, “The first key resistance is near the $95,500 level… Any more gains might send the price toward the $98,800 level.”
“Geoff Kendrick, the head of digital assets research at UK bank Standard Chartered, told investors that he’s bullish in a note on Monday,” Trista Kelley wrote for DLNews: “‘I look for a fresh all-time high of $120,000 in the second quarter,’ Kendrick wrote in a note on Monday. ‘Then, onto my $200,000 end-of-year forecast.’”
Volatility and Institutional Adoption
Bitcoin’s volatility creates hype alongside skepticism, with some investors, organizations, industries, and even nations focusing on crypto while others avoid involvement. While India leads in crypto adoption, nations like Australia lag in digital assets, for better or worse. Global economic policies involving ETFs, corporate holdings, and stabilization measures have the potential to stabilize or amplify Bitcoin price movements.
Interpreting the Factors Behind Bitcoin’s Price
Whether investors view Bitcoin as a “digital gold” hedge against inflation or a volatile asset best suited to quick trades, they can no longer focus on supply and demand as a market driver. While still a critical aspect of the Bitcoin price, this simple dynamic is insufficient to account for major macroeconomic events that impact the global market.
For instance, political instability, capital controls, and sovereign debt issues have the potential to drive interest in Bitcoin as a store of value, while overregulation, global adoption, or even centralization may drive away true crypto enthusiasts. After all, despite largely being seen as an alternative investment for diversifying portfolios, Bitcoin is intended as a means of exchange in place of traditional currency.
Staying Ahead of the Crypto Market
When an investor chooses to invest in Bitcoin, the abovementioned factors may already be relevant or soon to come into play. Supply and demand dynamics can certainly inform the market’s direction, but these do not account for the volatility brought about by macroeconomic factors. An investor must rely on their knowledge of historical price trends and a reliable real-time price tracking tool to find their place in the global crypto marketplace.
