Bitcoin Price Doubles in Institutionally-Driven First Quarter; What’s in Q2?

Bitcoin went into an upside mania in the first quarter of the year.

The flagship cryptocurrency surged by roughly 102 percent as investors showed no fears of risk-taking. On the contrary, they embraced it as interest rates on government bonds rose but remained near their historically low levels. New rounds of government stimulus packages further pushed investors to risky corners of the market, showing a lot of fiat liquidity in the market, waiting to enter speculative assets.

What a Quarter!

When 2021 began, bitcoin investors did not know that Democrats would sweep both the House and the Senate. But as the so-called blue sweep happened, it paved the way for their leader, the US President Joe Biden, to push through an expansive stimulus package than many had anticipated.

Additional dollar liquidity tends to make bitcoin investors and traders bullish.

Next month saw one of the most celebrated bitcoin investments ever made, led by Elon Musk’s Tesla, which added $1.5 billion worth of bitcoins into its balance sheets.

The US carmaker clearly stated in its securities filings that it considers Bitcoin as a store of value asset like cash. It added that it would start accepting the cryptocurrency as payments for its electric vehicles, a promise it realized ahead of Q1’s close. Payment company Square also added $170 million worth of BTC in its reserves, atop its $50 million investment last year.

Bitcoin price surged by up to 82 percent after Tesla’s announcement. Source: BTCUSD on TradingView.com

On the other hand, MicroStrategy kept raking Bitcoin on every price correction attempt.

In Q1 alone, the Nasdaq-listed software intelligence firm bought 19,714 BTC in two separate rounds. Meanwhile, Bank of New York Mellon, Mastercard, Visa, PayPal, Morgan Stanley, and Goldman Sachs announced crypto-enabled services, fueling prospects of higher retail and institutional interests in Bitcoin in the coming quarters.

Bitcoin FOMO or FUD in Q2?

When trends work, they really work.

Investors with skeptical views have tried to predict an imminent crash in the Bitcoin market. Nevertheless, each of the cryptocurrency’s downside corrections from its sessional top has met with strong accumulation. That coincides with a declining balance in wallets that hold more than 1,000 BTC and an increasing one in those holding less than 10 BTC, which shows a higher retail interest as the so-called “rich-list” secures its profits.

Past performance is not indicative of future results.

The second quarter for Bitcoin begins with the prospect of going further higher, led by President Biden’s explosive infrastructure spending plan. The 78-year old Democrat said Wednesday that he wants to raise an additional $2 trillion in infrastructure subsidies, mostly funded by corporate tax rises.

Investors could see more spending as a reason to go long-term bullish on Bitcoin.

The yields on longer-dated government debts might rise further in the second quarter, with the 1o-year Treasury note eyeing interest rate returns above 2 percent. The Federal Reserve wants to maintain inflation above 2 percent, so the bond sell-off may likely resume staying around the central bank’s target.

Or…

…in a rare blow to bitcoin, the Fed might raise its benchmark rates after keeping its near-zero for more than 12 months. Its chairman Jerome Powell has rubbished such anticipations in the past, assuring that they would go ahead with lower rates until 2024.

Past performance is not indicative of future results.

Inflation could also hurt growth companies since their future dollars have less purchasing power. Many believe that it could lead them to adjust their cash portfolios to accumulate experimental assets. Bitcoin appears like a great candidate there, especially as mainstream investment firms launch crypto-enabled services for their wealthy clients.

All and all, the second quarter is about both a technical downside correction and a further institutional boost. Inflation is one of the primary drivers for Bitcoin moving forward.

Photo by Michał Kubalczyk on Unsplash