- BTC soars above the crucial resistance level. Both trading volume and futures open interest hit new records after the March crash.
- BTC continues to rise steadily versus gold, indicating wider adoption
- Fed’s record balance sheet and expanding U.S. fiscal deficit will continue to support cryptocurrencies
BTC ascended above the resistance level at USD10500, in line with the gold price, which also climbed to an all-time high, getting ever closer to the USD2000 mark.
The excitement spilled over to Bitcoin’s derivatives markets, as the aggregated futures volume across major exchanges witnessed a 186% surge to approximately USD44 billion – a single-day record high since the market crash on March 13. In addition, the aggregated open interest sprang up to USD4.95 billion, as expectations of further gains heighten with renewed volatility.
Gold apparently leads the charge of so-called “zero-carry assets”, which includes silver and BTC. In line with our previous analysis, ETH spearheads crypto’s new bull momentum and is currently outperforming BTC in year-to-date returns.
Despite the growing correlation between gold and BTC, we observe a distinct upward trend in BTC/Gold. BTC emulates several of gold’s key attributes and is touted by crypto enthusiasts as the “digital gold”; so it’s hardly surprising to see gradual adoption of BTC as the modern-day safe haven.
The “synchronized“ bullish momentum of gold and BTC can be connected to the precipitated weakening of the U.S. Dollar, amid a faltering global economic recovery. The Dollar index dropped to 94. The erosion of the U.S. dollar is partly due to the Fed’s expanding balance sheet and growing public deficit. The Fed’s total assets bounced back to the level of USD7 trillion again last week, after substantial weekly purchases of USD37 billion mortgage-backed securities.
Federal policies will continue to support the U.S. economy as the Congressional Budget Office forecasts continued output gaps for the next several years. This means that the U.S. monetary policy won’t tighten unless the economy bounces back rapidly. The fiscal deficit is also expected to rise to around 18% of GDP this year, bordering on wartime record. As discussed in previous insight articles, the expansionary monetary policy will most likely continue to buoy the price of real assets, including digital assets.