Speaking to Bloomberg on May 4, Demirors, chief strategy officer of CoinShares, said that the Bitcoin price is under the influence of 2 main catalysts.
Meltem Demirors: We are entering a new crypto cycle
Bitcoin price managed to climb as high as $29,529 amid the ongoing US banking crisis. Minor market correction of the day weakens the bulls again. According to many analysts, ongoing market tensions currently stemming from the US banking crisis continue to shape investor sentiment.
Demirors offered a different perspective at this point. He stated that the main reason behind Bitcoin’s price action in recent months is not the US banking crisis.
According to Demirors, “I don’t think it was due to the banking crisis or the lack of confidence in the banking sector.”
Demirors believes instead that there are two main catalysts supporting Bitcoin: the recovery of investors’ risk appetite and the anticipation of next year’s halving in April, when miners’ rewards are halved.
‘Bitcoin price will depend on these two main catalysts’
Demirors, who identified two important price catalysts as ‘risk appetite’ and ‘Bitcoin halving’, ignored the US banking crisis. According to the CoinShares executive, investors in the harsh macro environment are always looking for opportunities in the market:
I think that in all markets, investors are pretty comfortable buying risk, despite concerns about the macro environment and rate prospects. I think we are entering a new crypto cycle. We have an upcoming Bitcoin halving. We see a lot of risk on the derivatives side of the market.
So I think it’s not just the banking crisis that’s particularly focused here, but a really broader appetite for risk, and investors are perhaps starting to get comfortable with reallocating and continue to turn to crypto.
Demirors also notes that Bitcoin’s price correlation with global stocks has dropped significantly. According to their statement, “Bitcoin’s stock correlation has dropped to its lowest level in a while, hovering around 12%.”
Increasing interest rates and its effect on Bitcoin, according to Demirors
The CoinShares executive recently focused on the Fed’s interest rate hike, which aims to reduce inflation. He said this should not hinder Bitcoin’s performance. However, he says the high interest rate is affecting decentralized finance (DeFi) projects.
I don’t think this is particularly a problem for Bitcoin. I think where we’re seeing more slowdowns is in the DeFi sector, where people have historically been used to seeing returns on lending stablecoins or on-chain dollar equivalents. What we’re seeing here is that stablecoin returns have dropped quite a bit in different DeFi implementations.
Demirors says investments such as bonds or bonds offer higher returns than DeFi products. At this point, he underlines that the cryptocurrency market is losing volume:
Treasury [Bond], a fairly low-risk and risk-free asset, yields 4% to 5%, while you get about 2% to 3%. It just makes it much more challenging. We have seen that this is reflected in the figures. Notably, on-chain activity for Bitcoin and Ethereum dropped by about 15% in April, with stablecoin activity and volumes falling close to 40% on both the Bitcoin network and the Ethereum network; this is the dominant trading pair for most crypto derivatives. So we’re seeing a drop in on-chain activity.
As Kriptokoin.com, we have included Demirörs’ recent analysis of the meme coin market in this article.
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