By Matteo Greco, Research Analyst at the publicly listed digital asset and fintech investment business Fineqia International (CSE:FNQ).
Bitcoin (BTC) closed last week reaching the $28,000 price level, with a 5% increase compared to the opening weekly price of about $26,750. BTC dropped to the lowest trading price of about $25,800 on Wednesday last week, due to investors’ fear concerning US reaching the debt ceiling. After an agreement to increase the US debt ceiling was reached, the markets had a good rebound and gained some momentum. However, the increase of the debt ceiling means that US government is expected to issue between $800b and $1,000b in the next six months. This means that, in the mid-term, money is removed from more risky assets, to buy government bonds. The consequence could be an additional slowdown in volumes and liquidity for the stock and digital asset markets, with a potential negative impact on prices.
Indeed, exchanges already show the lowest volumes since 2020, confirming how the trend of lower volumes has already been in place in the last few months and the issuance of additional bonds could favour the continuation of this trend. In addition, last week Personal Consumption Expenditures (PCE) Price Index came out with a 4.4% YoY increase, against a forecasted 3.9%. The CME futures now estimates a 60% probability of an additional 25bps hike rate in the next FED meeting, in June. All this data lead to strength for the DXY (Dollar Index), in comparison to risky assets. There is a growing expectation that the dollar is expected to have a better performance against risky assets in the next few weeks, even though macroeconomic conditions are changing so rapidly that it is difficult to state a strong prediction for the next 3-6 months.