Bitcoin International news

Crypto prices: Bitcoin to end first quarter on a bullish note

The cryptocurrency market cap was around $1.24 trillion as Bitcoin price reclaimed the $28,500 level, with crypto poised to end the first quarter of 2023 higher. BTC price was up 24% in the past 30 days, and 83% up year-to-date.

Crypto analyst Rekt Capital says Bitcoin is poised for a historic quarterly close, which could inform upward impetus over the next several months.

Meanwhile, bullish momentum over the past three months has also seen Ethereum price jump nearly 64% YTD. ETH with a daily close at current prices will see it end March 15% higher. The outlook for most top altcoins is the same, with XRP, Binance Coin (BNB), Polygon (MATIC) and Cardano (ADA) set to end Q1, 2023 higher.

Bitcoin and tech stocks higher YTD

While the US stock market opened higher on Friday, with equities buoyed by the latest economic data, the overall gains across tech stocks pale when compared to Bitcoin. For instance, the S&P 500 was 6.75% up YTD at 11:30 am ET, the Dow Jones Industrial Average was 0.4% down over the period and the tech-heavy Nasdaq Composite was 16.7% up.

However, Bitcoin and some tech stocks have outperformed most other assets this quarter. As noted above, BTC/USD is 83% up YTD and will likely close the quarter with more than 80% in gains. Tesla (TSLA) was 86% up at the time of writing, while Meta Platforms (META) was +63% YTD.

The Apple (AAPL) stock was +30% YTD on Friday, while Amazon (AMZN) had gained more than 20% this quarter.

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Bitcoin volatility rising as $4.2 billion options set to expire Friday

Key Takeaways

  • Bitcoin volatility is the highest point since July 2022
  • Liquidity is extremely thin which is pushing volatility higher and accentuating price moves
  • $4.2 billion of options expire Friday, with bull set to profit following the recent surge up to $28,000

Yesterday, I wrote a piece looking at how the correlation between Bitcoin and the stock market, notably tech stocks, has come back up. The relationship had loosened amid the banking turmoil that struck financial markets, triggered by the collapse of Silicon Valley Bank.

As well as rising correlation, the market is also swinging wildly – the volatility is as high as it has been since July 2022, around the time Celsius sent evaporated into thin air and sent the market into mayhem.

Why is volatility rising?

The volatility spike is not surprising in light of the glut of liquidity currently in the markets. We crafted up a piece on this earlier this week, assessing how 45% of stablecoins had flowed out of exchanges in the last four months, with the balance now at the lowest point since October 2021. 

It gives context to the recent Bitcoin price rise. With less liquidity in the markets, moves are naturally more violent, and Bitcoin has surged up to $28,000, now up 68% on the year. 

While the move to the upside has been exacerbated by this thin liquidity, the opposite also holds true: the downside risk is elevated when markets are so thin. 

It paints a picture of high risk for an asset that already oscillates wildly at the best of times. 

Derivatives add to volatility

Another factor? Derivatives open interest is absolutely soaring, with the below chart from Coinglass showing that options open interest is at its highest point since November 2021. 

As I write this on March 31st, a mammoth $4.2 billion of Bitcoin options are set to expire. The below chart also shows the strike prices of the options – with a call/put ratio of 2.09 and Bitcoin currently trading close to $28,000, it will be a profitable day for many traders. 

Digging into the numbers, there are 97,300 call options expiring at a strike price of $28,000 or less, compared to 24,500 put options. The dollar split is over $2 billion in favour of calls. 

Looking at strike prices of the next level up, it is pretty much all call options. Between $28,000 and $32,000 there are 48,000 call options against 400 put options with a $1.4 billion split in favour of calls. 

After a year of bears dominating, there will finally be some bulls primed to profit. 

Indeed, looking at the Bitcoin spot holdings, it is showing more positive news all across the market. In December, the majority of Bitcoins were in loss-making positions, when comparing the market price to the price at which they last moved. 

Today, however, 74% of the supply is in profit when using the same metric. 


With interest rate policy expectations softening, Bitcoin has finally been allowed room to run. However, with thin liquidity and high volatility comes risk, although when it comes to Bitcoin, risk is hardly a foreign concept.

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Bitcoin correlation with stocks rises again, normal service resumed

Key Takeaways

  • Bitcoin had deviated slightly from stocks over the last couple of weeks 
  • Correlation has bounced back since
  • Tech-heavy Nasdaq continues to trade in lockstep with Bitcoin as investors in both asset classes look to shifting expectations around interest rates 

It’s been an odd few weeks in the market. The banking wobbles over the last few weeks, triggered by the bank run on the crypto-friendly Silicon Valley Bank (SVB), caused everything to go a little wonky. 

One of the most curious aspects of this was a deviation from the normal Bitcoin/stocks relationship. Or, sort of. Bitcoin raced upwards while markets digested the banking news, with the correlation – at least on a short-term rolling 30-day metric – dipping as per the below chart. 

The chart also shows, however, that the correlation has since come back up. 

As I wrote in a deep dive at the time, we have seen these cases of temporarily dipping correlation a few times over the last year, most notably with the FTX crash in November, as well as the Celsius and LUNA crashes before it. 

But in each case, the correlation roared back. The above chart shows that it is beginning to do the same again this time. And the chart below shows that no matter what you swing it, the relationship here is pretty close (and forgive the axis crime on this one, please). 

What happens next?

The interesting question is what will happen going forward. The key development recently has been with regard to expectations around the future path of interest rates. 

The forecasts have been transformed. With hiking interest rates exposing the mismanagement of the aforementioned collapsed banks, the trouble has led to the market forecasting a pullback in plans to hike further. 

Instead of future hikes, there are now cuts in the pipeline, or at least according to the probabilities implied by fed futures. 

And it was the transition into this new interest rate paradigm, occurring last year as inflation began to roar and it became clear that central banks needed to act, which kicked the correlation up between stocks and Bitcoin. 

It is not that one is controlling the other, it is that Jerome Powell is controlling both. Tech stocks are particularly sensitive to interest rates, given the sector is valued so much by discounting future cash flows – and a lack of current profit – which is why the correlation, and bloodbath in 2022, was so strong between Bitcoin and the Nasdaq. 

Whether a potential pivot back off this uber-tight monetary policy sparks a deviation in correlation going forward is yet to be seen. Perhaps it will to a certain extent, but at the same time, it remains difficult to come up with a strong argument that Bitcoin is ready to truly deviate. 

A decoupling remains the ultimate bull vision for the asset, and perhaps it will get there one day in the future. But there is not much evidence, beyond blind hoping by those in the sector, that this is imminent. 

Over a multi-year time horizon into the future? That is anyone’s guess. But if the past couple of years has taught us anything, it is that stocks and Bitcoin are paired at the hip, especially tech stocks. The past couple of weeks, and the resumption of this trend, is actually more of a reminder of this than a proof against the theory.

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Bitcoin addresses with 10+ BTC have jumped 71% since February 2022

  • Bitcoin addresses holding 10 or more BTC grew 71% in just over a year.
  • According to on-chain data, 10,279 new BTC wallets joined the cohort holding 10+ bitcoin between February 2022 and March 2023.
  • Wallets with 10-100 bitcoin cumulatively hold over 4.4 million BTC, or roughly 23% of supply.

While cryptocurrency prices fell sharply as the bear market of 2022 saw massive contagion across the industry, the number of addresses holding 10+ bitcoins kept rising. Wallets in this category grew 71% between February 2022 and March 2023.

10.3k addresses with 10+ BTC added since February 2022

According to the latest data from crypto analytics platform Santiment, the number of addresses with more than 10 BTC have increased by 10,279 since February 2022.

Per the data, total bitcoin holdings within this cohort remain largely stagnant. However, a 71% increase in the amount of addresses for the past year or so sees these wallets’ overall holdings approach the all-time highs reached in 2019. 

Currently at 155,000 addresses, the number of bitcoin wallets with 10 or more BTC are just 2,000 less than the all-time high of September 2019, Santiment tweeted on Thursday.

Looking into bitcoin distribution data as of 30 March, about 139,864 wallets hold between 10-100 bitcoin, with total holdings of over 4.43 million coins for 23% of supply. Another 14,033 wallets currently hold 100-1000 BTC, accounting for just over 20% of supply at 3.9 million BTC.

On-chain data also shows the largest whales, with 1k-10k bitcoin and 10k-100k BTC holdings, number 1,906 and 112 respectively. Cumulatively, these wallets hold about 6.9 million coins to account for roughly 35% of bitcoin supply.

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Mike Novogratz says Bitcoin and Ethereum are the best risk-adjusted investments today

  • Mike Novogratz is bullish on crypto, particularly the top two coins Bitcoin and Ethereum.
  • The Galaxy Digital CEO says BTC and ETH been best risk-adjusted investments over the last few years.
  • He also suggested during the company’s earnings call that the US risks losing its place as finanial and innovation leader.

Galaxy Digital CEO Mike Novogratz says crypto is in “a good moment” highlighting the fact that Bitcoin and Ethereum have been the best risk-adjusted investments in the world over the past few years.

The billionaire investor said this while commenting on the crypto market outlook during Galaxy Digital’s earnings call. He said:

“I look right now and say, “What’s the good?” Bitcoin is trading over $27,000, Ethereum over $1,700. On a risk-adjusted basis, that’s volatility adjusted, Sharpe ratio adjusted, Bitcoin and Ethereum have been the two best-performing assets in the world this year. They’ve been the two best-performing assets in the world over the last two years. So, whatever Jamie Dimon wants to say, whatever the Biden administration wants to say, they’re just wrong, and the world knows that.”

Novogratz explains what’s driving crypto

Bitcoin has tested resistance near $29,000 in 2023, with its current price of $28,650 about 84% higher year-to-date. Ethereum has also traded above $1,800 as investors eye the $2,000 level. According to latest market data, the price of Ethereum is about 61% higher YTD.

In Novogratz’ opinion, recent price action has the top coins poised for greater gains over the next several months. As highlighted in the earnings call transcript, the Galaxy Digital CEO believes all “the selling that needed done as crypto prices fell was done.

Retail has also been behind much of the recent price appreciation, the billionaire investor added.

What’s promising, and what has driven crypto broadly this year, is two things. One, all the selling that needed to get done got done, right? There was so much bad news, if you had to sell, panic selling and just the nervousness of “Oh my God! This thing could go to zero,” and people were in sheer panic, you had seller’s exhaustion. But, you’ve had Asia reopen. China has—you know, post the Xi protests around COVID Zero, China took the regulatory boot of the necks of their tech companies, and that includes crypto, so you’re seeing, with Chinese traveling, you’re seeing more activity from Asia.”

Bitcoin could be “substantially” higher in a few months

Novogratz also believes the current wave of adoption across the Middle-East, Hong Kong and Europe is good for the crypto industry, even as the US risks losing its place as a financial market leader. 

According to him, the Biden administration’s attack on crypto, as evidenced by the series of enforcement actions and charges among other things, is shortsighted.

As for his outlook for Bitcoin and the broader crypto market, the Galaxy Digital chief noted:

The market feels strong, and when I look at it technically on charts, we’ve had big weekly closes. I’m surprised to hear myself say this, given where my mindset was in late December, but it would not surprise if we were substantially higher three months, six months, nine months from now.”

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17 straight days of positive realised profit for Bitcoin, the longest streak in a year

  • On-chain profit metrics have picked up as the Bitcoin price has risen
  • Net realised profits have been positive for 17 days, the longest streak in a year
  • 74% of the Bitcoin supply is in profit, three months after it dipped below 50% after FTX collapsed and the Bitcoin price fell towards $15,000
  • Volatility has picked up but it is the thin liquidity which is really helping Bitcoin make a run
  • It’s been a great quarter for investors, but there remains peril, writes our Analyst

Bitcoin had an unforgettable year in 2022 for all the wrong reasons, a collapse in price coinciding with several ugly scandals that rocked the cryptocurrency market at large. 

Thus far this year, however, it has been bouncing back. Up 71% as we close out Q1, it is trading north of $28,000 for the first time since June 2022. 

Looking into on-chain metrics, the positive sentiment is clear.

Net realised profit at one-year highs

The net realised profit of all coins, that is the difference between the price at which a coin moves and the last price it moved at, is on its longest positive run since this time last year, in March 2022. 

For seventeen days now, the net realised profit has been positive. In other words, coins are moving at prices higher than what they were bought at (or the price at which they last moved).

There was an 18-day positive streak in late March / early April last year, and beyond that, we need to go back to Q4 of 2021 to see such a streak, when Bitcoin was trading at all-time highs. 

Granted, the size of the profits over the last two weeks have not been as outsized as we have seen in previous periods, but the very fact that it is a positive run after the year Bitcoin has had is notable. 

Three quarters of the supply is in profit

Another way to see how much things have changed is that three-quarters of the total supply is currently in profit. 

Just before Christmas, I reported when this figure dipped below 50%, meaning for the first time since the brief flash crash at the start of COVID in March 2020 when the financial markets all went bananas, the majority of the Bitcoin supply was loss-making. 

Three months later, the picture is a lot brighter, with 74% of the total supply now in profit. 

Liquidity remains low as stablecoins fly off exchanges

Interestingly, this rise in prices and profit positions is all occurring at a time when liquidity is extremely low in the market. 

In a deep dive yesterday, I compiled an analysis showing that the balance of stablecoins on exchanges has fallen 45% in the last four months and is currently the lowest since October 2021. 

Perhaps that is not a coincidence. The markets are ultra-thin right now, and Bitcoin, which is volatile at the best of times, has found it easier to move aggressively as a result. This also helps explain why it has outperformed the stock market so significantly, despite being so tightly correlated with it recently (although some believers are arguing it is due to banking failures pushing people to Bitcoin, but that feels like a reach). 

Then again, Bitcoin is going to Bitcoin, and its recent volatility is not anything to write home about when looking historically, even if it has picked up compared to the relatively serene period post FTX collapse

To wrap this up, it’s been a superb few months to kick the year off for Bitcoin, which is a welcome reprieve for investors who got absolutely battered last year. On-chain profit metrics have come right up as sentiment improves and prices jump. 

But there is also low liquidity which is helping it run-up, while the wider economy presents plenty of uncertainty. Sure, it’s a great start, but it’s not out of the woods yet. 

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45% of stablecoin balance has left crypto exchanges in 4 months, but where has all the money gone? – A Deep Dive

Key Takeaways

  • $23.6 billion of stablecoins are currently on exchanges, the least since October 2021
  • 45% of stablecoins have fled exchanges in the last four months
  • 61% of USDC has left exchanges in the three weeks since Silicon Valley Bank’s collapse, while 50% of BUSD has evaporated since regulators announced it was to shut down
  • Trend in falling supply of stablecoins has been ongoing since FTX collapsed in November, but has worsened recently
  • Capital is flowing into T-bills, with 5 times the amount of treasury accounts created last year as 2021
  • Bitcoin’s falling price and volumes are more extreme, but liquidity has been siphoned out of the markets at large due to rising interest rates 
  • Federal Reserve is now caught between rock and a hard place, as rising interest rates needed to combat inflation but banking sector wobbles may force its hand

It’s always turbulent in the crypto markets. 

The waters have been particularly choppy recently with regard to the stablecoin market. There are currently less stablecoins on crypto exchanges than at any point since October 2021. 

But where is all the money going? Into Bitcoin? Hidden away in cold wallets? Away from crypto altogether?

In this piece, we dig into the data to try to ascertain where exactly the money is moving, and why, as well as what it means for Bitcoin and how it all ties back to the Federal Reserve. 

The flight of stablecoins

First things first. Stablecoins are fleeing exchanges at an unprecedented speed. In less than four months, 45% of stablecoins have left exchanges. That is a drawdown from $43.1 billion to $23.6 billion, a pace that has never been seen before. 

The chart shows a clear downward trajectory since the implosion of FTX in November 2022 – with the pace picking up since the turn of the year. 

In the next chart, we focus on the outflows alone, helping us to zone in on the speed of these movementts and how they compares to previous periods of outflows. 

We can see that in terms of precedent, we saw big spikes in outflows in May 2022 (when LUNA collapsed) and May 2021 (when Bitcoin freefall down from $58K to $37K in a week, despite no obvious trigger). But the difference this time is that the elevated pace of withdrawals has continued for a much longer time period, at four months and counting. 

Perhaps layering in price gives more of an indication as to what is happening. In this next chart, we can see big drawdowns in Bitcoin price have coincided with large amounts of stablecoin withdrawals. 

But it brings us to an interesting crossroads: this time seems different. As while FTX kicked off a Bitcoin drawdown to $15,500 from $20,000 in November, since then Bitcoin has increased 80%, back up towards $28,000. And yet, the stablecoin balance has continued downward. 

BinanceUSD and UCD Coin run into problems, but Tether drained too

So why is this time different? Why are withdrawals of stablecoins remaining elevated while Bitcoin surges?

Well, the events around Binance USD and USD Coin are the most glaring. It was announced last month that Binance USD is shutting down due to US securities law (deep dive on that circus here). At the time, the stablecoin had a market cap of over $14 billion, the third biggest behind USDC and USDT. 

In the words of CEO Changpeng Zhao, the developments meant that BUSD will slowly decline to zero.

And that is what has started. 17% of BUSD was immediately pulled from exchanges in the days after the announcement. Today, the supply of BUSD on exchanges is 7.2 billion, 50% below the number upon announcement of the lawsuit. 

But there is more here beyond the impact of BUSD’s regulatory-driven fall. Firstly, BUSD’s supply had been falling since the FTX debacle, when there was $22 billion on exchanges, as the above chart shows. 

But there is also the case of USD Coin, the stablecoin issued by Circle, who kept 8.25% of the backing reserves in the felled Silicon Valley Bank. While deposits were since guaranteed by the US administration, the episode shook the market and sparked outflows that have not reversed. 

On March 10th, as the SVB trouble and hence concern around USDC’s reserves came to light, there was $6.65 billion of USDC on exchanges. Today, less than three weeks later, there is $2.57 billion, a fall of 61% – completely wiping out the increase in the USDC supply on exchanges that had happened in the aftermath of the BUSD shutdown. 

Which brings us to the third member of the three musketeers, Tether. Has the number one stablecoin hoovered (hoover means vacuum, for all you American readers) all the BUSD and USDC supply? Well, no. 

As the world popped champagne on New Year’s Eve, there was $17.81 billion of Tether on exchanges. Today, on March 27th, there is $13.55 billion, a decline of 24%. 

Putting the balance of all three stablecoins on one chart, the below can be seen – clearly, Tether has the lion’s share, but the balance of stablecoins across the board has evaporated. 

“There is a lot of talk about Tether’s rise in market share”, said Max Coupland, director of CoinJournal. “That is a story in and of itself, but to us, the greater effect is the remarkable drawdown in the stablecoin market at large. Tether may have gained market share, but to see an evaporation of 24% of the USDT balance on exchanges is notable – and that it has gained market share despite this drawdown hammers home how stark the capital flight out of the entire space has been”. 

Where is it all going?

So, the natural question is then, where the f**k is all the money going?

Since the start of the year, Bitcoin is up 64%, adding $209 billion to its market cap while climbing from $16,500 to $27,000. So are people just sending all their stablecoins from exchanges into Bitcoin?

That is a difficult question to answer. Looking at the stablecoin supply ratio (SSR), which is the ratio of the Bitcoin supply to the supply of stablecoins, shows that it has risen significantly in the last few months (it had previously done the exact opposite). 

But this doesn’t necessarily mean that stablecoins are flowing into Bitcoin, and concluding that feels like a reach. 

In all likelihood, it simply means that the Bitcoin markets are becoming less liquid as capital is leaving the entire space. This would help explain why the move up this year has been so violent, as less buying power has been needed to move the dial. 

Treasury market holds the answer to the riddle

But let us not forget about where interest rates are right now. 6-month US treasury bills are currently paying close to 5% currently, 3-Month yields are at 4.6%. It’s starting to make a little more sense why there is less money in crypto right now, isn’t it?

In fact, looking at, the website where government bonds can be bought, there were 3.6 million accounts created in 2022 as interest rates surged – that is a five-fold increase from the previous year. And extrapolating the accounts created from the first ten weeks of the year, we are on track to see another 1.1 million created in 2023 (although the Federal Reserve’s updated plans may change that). . 

This is what the Federal Reserve wants

And this allows us to circle back to the very crux of the issue. Why is the Federal Reserve raising interest rates in the first place?

The Fed has been raising rates to combat inflation which spiralled far quicker than they imagined. And it wasn’t only the pace, but it was the stickiness of the price rises – the “transient” dream pedalled was nothing more than that, a dream. 

In order to topple that inflation, liquidity needed to be siphoned out of the system. Which, as this piece has demonstrated, is exactly what has happened. Bitcoin is a more volatile and thinner asset than other financial markets, which is why the effect has been so dramatic, but we have seen the price of risk assets freefall across the board over the last year. 

In conclusion, there is nothing surprising about Bitcoin’s collapse in price, nor the flight from the capital market, when viewed in hindsight against the backdrop of the crippling rise in interest rates. 

Of course, hindsight is everything, and investors were caught off guard badly here. Now, as the banking sector wobbles under the weight of these rising interest rates, the Federal Reserve is caught in between a rock and a hard place; it can stop raising rates and be the central bank that failed on the all-important inflation mandate, or it can raise rates further to battle inflation while risking more chaos in the banking sector. 

The market is betting on the latter, that the Fed will move to softer monetary policy, which is why we have seen a rebound in the Bitcoin price. This has been exacerbated by the thin liquidity in the markets. 

If a hawkish tone comes out of the Fed in future however, or the market’s confidence in a pivot drains, you can bet your bottom dollar that Bitcoin’s gains thus far in 2023 will be halted, if not reversed. Whatever happens, it certainly feels like the market and economy is currently at an inflection point. 

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3 German computer scientists bringing scalability to Bitcoin using zk-proofs

  • The three German scientists formed ZeroSync Association to bring Zero-Knowledge Proofs to Bitcoin.
  • The association has received sponsorship from Geometry Reaserch and StarkWare Industries.
  • Geometry Reaserch is a crypto investment firm while StarkWare Industries is the software company behind StarkNet.

Bitcoin currently uses the proof-of-work (PoW) consensus mechanism which in a way limits its scalability. Its rival blockchain Ethereum also used PoW but changed to Proof-of-Stake (PoS) consensus mechanism through the Merge Upgrade.

Three German computer scientists have created a Swiss non-profit association called ZeroSync Association to help bring scalability to Bitcoin using zero-knowledge proofs (zk-proofs), a cryptographic technique whose popularity on Ethereum has surged considerably.

What is Zero-knowledge Proofs?

Zero-knowledge Proofs, commonly referred to as zk-proofs, is a cryptographic technique that uses cryptography to prove the validity of information revealing the information to the public.

By deploying kz-proofs on Bitcoin means nodes will be able to sync almost instantly compared to hours and sometimes days that it takes to download the chain’s current 500GB data.

ZeroSync Association already has a working prototype

At the moment, ZeroSync has already developed a working prototype that allows users to validate who owns what and the transaction history on Bitcoin without having to download the entire chain or using a third party.

The prototype can however only verify Bitcoin consensus rules but not transaction signatures. The prototype is also a bit chunky and still needs to be optimized for security and speed.

When fully deployed on Bitcoin ZeroSync will allow verification of transaction of Bitcoin using cryptographic proof instead of trusting honest nodes as suggested by the Bitcoin founder Satoshi.

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MicroStrategy buys another $150 million worth of Bitcoin

  • MicroStrategy founder Michael Saylor announced the company had repaid the $205 million loan at a 22% discount.
  • The company also bought 6,455 bitcoins worth $150 million.
  • Saylor’s company currently holds more than 138,900 bitcoins.

MicroStrategy, the world’s largest corporate holder of Bitcoin, has revealed it recently purchased more BTC. 

The business intelligence company, founded by Bitcoin bull Michael Saylor, also announced on Monday that it had repaid the loan to the failed crypto-friendly bank Silvergate Bank.

MicroStrategy repays $250 million loan, buys 6,455 BTC

Saylor, referencing his company’s latest SEC filing, said that MicroStrategy has now fully repaid the $205 million loan it borrowed from Silvergate in March 2022. The company reportedly cleared the loan principal with a 22% discount, with Friday’s payoff seeing MicroStrategy clear the collateralized loan at $160 million.

As a result, the company recouped its 34,619 BTC that had been pledged as collateral.

MicroStrategy also confirmed the purchase of 6,455 BTC, acquired for a total of $150 million and at an average $23,238 a coin. Saylor’s bitcoin strategy now includes a total Bitcoin haul of 138,955 BTC since the company’s first move in 2020. 

So far, the total BTC holdings have been acquired at a cost of $4.1 billion, with each bitcoin purchased at the average price of $29,817.

Bitcoin currently trades around $27,809 while MicroStrategy shares closed at $256.67 on Friday and were 0.07% down at 9.10 am ET ahead of US markets opening on Monday.

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Bitcoin slides off Fed meeting before bouncing back, but what next?

Key Takeaways

  • Federal Reserve hikes 25 bps, Bitcoin drops over 6%
  • Bounceback in prices follow, however, as market bets on rate cuts down the line
  • Bitcoin originally fell to $26,700 and is now back at $27,700
  • Tight monetary policy appears to be coming to a close, which is exactly what Bitcoin investors want to hear
  • The flipside is that Bitcoin’s reputation may have been tarnished by the chaos in the industry over the last year
  • Whether institutional money and Wall Street capital will trust crypto again remains to be seen

As has been the case over the last year now, Bitcoin continues to oscillate wildly based off interest rate expectations. 

The orange coin took a tumble Wednesday off the back of the latest FOMC meeting, as interest rates were hiked 25 bps despite some analysts calling for a pause following the banking turmoil of recent weeks. 

Why did Bitcoin fall?

Such has been the chaos in the banking markets, markets ahead of the meeting had priced in a genuine chance that rate hikes would be no more. 

Silicon Valley Bank (SVB) triggered the crisis, which last week spread to Europe before the spectacular demise of Credit Suisse, the Swiss institution founded in 1856. 

With deposits fleeing banks and markets reverberating, things were breaking – as they tend to do when rates are hiked hastily. And this past cycle has been the most rapid form of tightening in recent memory. 

Bitcoin fell from $28,500 to $26,700 as the Fed announced a 25 bps hike, a fall of 6.3%. 

However, Bitcoin has since bounced back somewhat, trading at $27,600. This came as the market began digesting the discourse from Fed chair Jerome Powell around the future path of interest rates. 

While the hike did come yesterday, it feels increasingly certain that tight monetary policy is coming to a close. It is worth remembering that before SVB’s demise, this hike was virtually guaranteed to be 50 bps. 

And looking out to rates by the end of July, the market is forecasting cuts rather than hikes. So while the 25 bps hike may have been hawkish, the language afterwards and conclusion coming out of the meeting was very much the opposite. 

Will Bitcoin go up?

The question on everybody’s lips within crypto is then what does this mean for Bitcoin’s price? As always, it’s a difficult question to answer, but the future undoubtedly looks brighter for the coin today than it did a few months ago, that is for certain. 

Not only is further removed from the scandal of FTX and the wave of bankruptcies that followed the sordid collapse of the former tier-1 exchange, but the end appears nigh with regard to the tight monetary policy. 

Bitcoin was launched in 2009 and hence had never experienced anything other than a raging bull market in the wider economy. The S&P 500 increased seven-fold from the nadir of the GFC to its peak – and Bitcoin, alongside tech stocks, rode the wave of low interest rates, warm money printer and an all-around perfect climate. 

As inflation roared last year, however, this flipped entirely. With interest rates hiked aggressively, there was no way for Bitcoin to sustain its previous levels of buoyancy. Down it came, and down it came hard. 

Finally, it appears that the harsh monetary policy which has dragged it through the gutter is nearing an end. And while this doesn’t guarantee anything, it certainly removes the shackles so that there is at least a possibility that it raises. 

Has Bitcoin’s image been tarnished?

The flip side of the argument is that the scale of the damage over the last year has been so substantial that Bitcoin’s long-term trajectory has been dampened, and it won’t be able to get on the same track. 

Crypto winters have come and gone in the past, but this recent one coincided, like we said, with a rout in the wider economy for the first time ever. It also came while Bitcoin was a mainstream financial asset – something which wasn’t true in previous cycles. 

Collapses like FTX, LUNA and Celsius not only pillaged capital out of the space, but embarrassed crypto on the big stage, as unfair as that is to the good players in the industry. Will institutional funds and trad-fi money be happy to trust crypto again?

It’s an interesting debate, and only time will tell. 

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