Bitcoin rallies as stock markets decline. Here’s why

Bitcoin’s (BTC/USD) recent growth stems from its appeal as a store of value, Bitcoin ETF speculation, continued institutional inflows into the crypto market, and positive seasonality according to experts. Here’s a detailed look at these factors.

Institutional inflows

Venture capitalists and institutions are pouring money into crypto despite bearish price trends in the not too distant past. Shiliang Tang, CIO of crypto hedge fund LedgerPrime, told CoinDesk:

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New quarterly months have typically seen a lot of new fund inflows into the ecosystem. So funds need to put capital to work, which has helped in this case. A few funds we’ve spoken to have seen very strong new capital inflows this quarter.

According to ByteTree Asset Management, Canadian and European ETFs as well as North American closed-ended funds have accumulated over 3,000 Bitcoin in the past month. Jeff Dorman, CIO at Arca Funds, believes the rallies of the broader crypto market are:

…primarily driven by untrackable fund flows – venture capital investments, hedge funds, and direct purchases of digital assets via Fidelity, Coinbase and others. Ask any OTC dealer who specializes in digital assets or any liquid digital asset fund manager, and they’ll all point to significant and constant monthly inflows.

Protects against inflation

Carlos Betancourt, co-founder of BKCoin Capital, said:

Inflation is here to stay, and every household is starting to see prices skyrocket for goods and services nationwide. Many savvy investors look for asymmetric opportunities and a hedge against inflation, and there is always one common asset that comes to mind … remember, Bitcoin is the only asset that governments or central banks cannot manipulate.

A survey by the New York Federal Reserve predicted rising inflation for ten months in a row, reaching 5.2% in August 2022. In the EU, inflation growth is increasingly being predicted as well.

Max Boonen, founder of crypto market-making firm B2C2, commented:

Inflation fears are lifting expectations of the future path of interest rates by the Federal Reserve. As usual, that could weigh on stocks. On the other hand, bitcoin is seen as more insulated against inflation than equities thanks to its fixed supply.

ETF Speculation

The Bitcoin market is also being driven by expectations that SEC will finally approve a futures-based ETF. Betancourt added on that note:

Canada officially approved a crypto ETF that includes both Bitcoin and Ether (ETH/USD) and U.S. SEC Chair Gary Gensler showed support for a futures Bitcoin ETF recently, and that’s certainly been digested by investors as a bullish sign. The SEC is reviewing over 20 applications for ETFs and futures ETF products linked to Bitcoin and Ether.