BTC’s inflation-hedge narrative may be winning out against its risk-on classification in the minds of institutional investors.
Bitcoin has continued its robust recovery, up almost 14% (WoW), despite market fears that there could be more rate hikes than initially expected. Bitcoin difficulty has begun to plateau, its increase on February 4th stood insignificant at +0.18%, with high probability that the next adjustment will mark the first decrease since November 2021. As a result, hash price has begun to rebound strongly, and we are now targeting a YTD high.
What’s next for hash price? Many indicators suggest that market sentiment is recovering. The crypto Fear and Greed index is neutral for the first time this year leaving many analysts sure that BTC price has formed a bottom. The latest fears around monetary policy have yet to dent BTC’s recovery, rather, BTC’s inflation-hedge narrative may be winning out against its risk-on classification in the minds of institutional investors. Most investment banks believe that, despite rate hikes, the Fed will not push inflation below 2%. We anticipate that data released on Thursday will show persistent inflation in the US, further supporting this narrative.
We expect the systemic mismatch of supply and demand, a result of the colliding macro-trends: pandemic recovery and the energy transition, to hamper the Fed’s ability to govern inflation. Out-of-control inflation would herald a significant tailwind for commodities and BTC. In short, the very fears encapsulated by Satoshi Nakamoto into the genesis block’s Coinbase data lie at the forefront of global investors’ minds. Evidencing this, it was revealed this week that big four firm KPMG made treasury allocations to BTC and ETH in their Canada office last year. So, institutions continue their uptake of crypto, undeterred by recent volatility. We concur.