Behind Bitcoin's New Highs: Institutional Funds Getting on Board and Favourable Information in the Macro Environment

In the era where cryptocurrency intersects with artificial intelligence, the truly important stories often hide beyond the noise. Recently, Bitcoin has once again broken through historical highs and continues to rise, with the driving forces behind this being different from before. This article will delve into the reasons behind this phenomenon and its possible impacts.

Market Performance

The strong performance of Bitcoin prices is eye-catching, while the US stock market has also seen a comprehensive increase. The Nasdaq and S&P 500 indices have both reached historical highs, and the Dow Jones Industrial Average is also approaching its peak. This indicates that the overall market has entered a risk-on mode.

Macroeconomic Background

The United States has passed a bill to expand fiscal spending and debt, which may undermine the credit of the dollar in the long run. In fact, the rating agency Moody's downgraded the U.S. debt rating in May. This policy backdrop provides upward momentum for alternative assets such as Bitcoin.

Institutional Capital Becomes the Main Force

Unlike the past bull market dominated by retail investors, this round of increase is mainly driven by institutional capital:

1. In June, over 250 companies announced increased holdings of Bitcoin, totaling 68,000 Bitcoins.
2. Last week, 54 entities added 8,434 Bitcoins to their positions, including a well-known design software company.
3. Bitcoin ETF had a net inflow of 1.6 billion USD between July 6 and 11, with a single-day inflow of 1.18 billion USD on July 10, setting a record for the second highest in history.

Corporate Coin Holding Phenomenon

Some technology companies have started to include Bitcoin on their balance sheets, motivated by asset diversification, appreciation potential, and brand differentiation. However, this strategy is not suitable for all companies and needs to be determined based on their own risk tolerance and strategic objectives.

The Dual Properties of Bitcoin

Bitcoin exhibits a unique hybrid characteristic. During periods of risk appetite, it rises like tech stocks; while in times of crisis, such as the recent trade war, it has safe-haven properties similar to gold. This duality is both an advantage and could potentially become a weakness.

Potential Risks

Despite the strong upward momentum at present, there are still some potential risks:

1. The Federal Reserve may unexpectedly raise interest rates.
2. Regulatory policies may tighten.
3. Geopolitical "black swan" events may interrupt the upward trend.

However, these risks are not yet imminent, and funds continue to flow into the market.

Favourable Information in Macroeconomics

1. Dollar Trust Crisis: Fiscal expansion has intensified inflation concerns, prompting investors to turn to scarce assets. Bitcoin's fixed supply of 21 million coins has a scarcity even stronger than gold.
2. Improved risk environment: Geopolitical conflicts have eased, and inflation data in Europe and the United States is lower than expected.

Regulatory environment turns friendly

1. The U.S. Congress is reviewing important legislation related to cryptocurrencies, including the stablecoin framework and market structure.
2. Personnel changes in regulatory agencies show an open attitude towards the cryptocurrency industry, indicating that policies may gradually loosen.

Overall, the current rise of Bitcoin is attributed to the large-scale entry of institutional funds, changes in the macroeconomic environment, and shifts in regulatory attitudes. These factors together have created a "perfect storm" favorable for the development of cryptocurrencies. However, investors should remain cautious and closely monitor market trends and potential risks.