22 Apr

BlackRock's Bitcoin exchange-traded funds (ETF) iShares Bitcoin Trust, which trades under the ticker "IBIT," has had inflows for 69 days running, according to a social media post by Eric Balchunas, an analyst with Bloomberg Intelligence ETFs.

At 840,000 blocks high, the fourth Bitcoin halving happened late on Friday. This signaled a significant shift in the supply dynamics of cryptocurrencies. About every four years, there is a halving event that lowers the mining reward from 6.25 bitcoins to 3.125 bitcoins.

The halving of Bitcoin has consequently led to a shortage in supply. Cuts are a part of a planned plan to keep the total amount of Bitcoin at 21 million, increasing its rarity by halving the amount of new coins that are put into circulation.

Middle East Geopolitical Risk Affecting Market

The price of Bitcoin has been impacted by the escalating Israel-Iran confrontation. The military scenario in the Middle East caused volatility and a sell-off in Bitcoin last week. Bitcoin is typically viewed as a hedge against unpredictability in the world. The price of bitcoin is still steady on Monday, hovering at $66,300.

The strengthening of the dollar, as gauged by the U.S., was one financial impact of the Israeli conflict. Dollar Index. This is an effort to increase safety. In such a scenario, portfolio managers lower the exposure to assets with significant volatility. Within a portfolio that also includes stocks and bonds, bitcoin has one of the highest historical volatility. Thus, portfolio managers divest Bitcoin in order to significantly lower their portfolio volatility,” Basile Maire, a co-founder of D8X, a decentralized exchange. 

Trading in Bitcoin ETFs is a Major Factor in the Macro-Driven BTC Price

Maire continued by saying that previously in the year, we had observed comparable price movements for Bitcoin that were accompanied by a strengthening of the dollar or a flight to safety. Financial markets are frequently temporarily impacted by these political developments.

Rather than trading cryptocurrency natively, it appears that trading Bitcoin ETFs is the main source of macro-driven price repercussions on the cryptocurrency. According to Maire, the introduction of ETFs appears to bolster the influence of macro-events on Bitcoin prices.

According to Maire, "it makes sense from the perspective of portfolio management that Bitcoin and other cryptocurrencies may see more severe declines in this scenario compared to stocks and other traditional assets."

In the long run, this does not conflict with Bitcoin's potential as a hedge against instability around the world.

April 2024, Cryptoniteuae

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