Yesterday there were positive updates for the Bitcoin market.
Although these are different updates, in reality they are probably just different aspects of a single basic dynamic.
In this article we will first analyze the updates separately, and then reconstruct the dynamic that underlies them.
The whales that are buying
When traditional markets reopened after the weekend, some whales started selling Bitcoin above $80,000 to cash in the profits of the previous days.
In fact, they had been accumulating BTC since last Wednesday, especially below $78,600.
Therefore yesterday it was more than logical that there were sales by whales who were precisely cashing in their gains.
However, when the US stock exchanges reopened, several hours after the Asian ones, the whales started buying.
In other words, they changed their minds: first they were selling, and then suddenly they were buying.
It seemed as if Asian and European whales were merely cashing in profits yesterday, while the American ones knew something more.
Indeed, the price later rose to $81,000, but American whales kept buying.
The release of dollars by the US government
Late in the evening the Treasury Department published, as it does every business day, the total balance of dollars held in the government’s bank accounts as of the close of the previous day.
The figure published yesterday therefore referred to Friday’s close, and it turned out to be lower than Thursday’s by as much as 112 billion dollars.
This means that on Friday alone the US government released more than one hundred billion dollars onto the market.
Given that in the previous weeks it had drained as much as 300, yesterday’s figure was staggering.
Moreover, when the US government releases, or drains, so much liquidity in such a short time, the effect on financial asset prices is almost immediate, albeit minimal.
And so, since on Friday the effect was almost non-existent, and over the weekend it could not occur because traditional exchanges are closed, it materialized yesterday after the reopening of the American ones.
The war in Iran
On top of all this, the situation in Iran is stabilizing, even though the war is not yet over.
As for the impact on US financial markets, one can take as a reference the VIX index of implied volatility on the S&P500, the so‑called “fear index”.
After rising from 16 to 29 points from mid‑January to the end of March, it started to fall in April.
The bulk of the decline occurred shortly before mid‑April, but starting from Friday, May 1st, it fell below 20 points for the first time since February 13th.
The drop of the VIX below the psychological threshold of 20 points certainly pushed some speculators to take on a bit more risk, turning their attention back to growth assets such as Bitcoin.
The underlying dynamic
It is possible to put forward a hypothesis.
Yesterday, when the US stock exchanges reopened, the figure relating to Friday’s closing balance of the total dollars held by the US government in its bank accounts had very likely already been processed, even if not yet made public.
Moreover, there are some indirect measures that can suggest how that figure evolves over time even before it is made public.
The hypothesis that can be put forward is that yesterday American whales, at the reopening of the US stock exchanges, already knew or sensed that the US government had flooded the markets with liquidity on Friday.
But we can also venture something more.
Indeed, it is certain that someone in the government already knew this on Friday itself, or perhaps even in advance.
In other words, it cannot be completely ruled out that there is a very precise strategy behind all this.
The idea is that, if the US government had already decided on Friday to calm the situation in the Middle East (as highlighted by the VIX falling back below 20 points), perhaps it was no coincidence that it released 112 billion dollars onto the markets in a single day.
The effect of such a release on financial asset prices was easy to predict, given the amount, and this information may also have leaked from the government before the official figure was published yesterday evening.
Therefore it cannot be ruled out that behind the three updates mentioned above there is a single dynamic due to a very precise strategy to make growth asset prices rebound, including Bitcoin.
It should not be forgotten that the S&P500 is already at its highs, so it is hard to imagine that it can perform brilliantly. Bitcoin instead has a lot to recover, and in theory therefore could even end up outperforming the S&P500 in the coming days.
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