Tenacious streak

Bitcoin ETFs suffered record one-day outflows. Prognosticators are turning sour. Financial watchdogs are on the prowl.

That long-awaited Fed rate cut? Not happening.

And still, total crypto assets, as of Thursday at 7:26 a.m. (EST), increased 2% in the past 24 hours. The combined market capitalization (of the 14,000 digital assets tracked by CoinGecko) now stands at $2.3 trillion. The largest digital ducat, Bitcoin, which early yesterday morning saw its spot price sink below $57,000, has semi-rebounded to about $58,200.

Within the ranks of the Big Ten, Solana reversed fortune most noticeably.

SOL is the crypto sector's fifth-largest coin in terms of its market capitalization ($60B); the token kicked off the month of May languishing on the brink of $119 but is right now pushing $140 after a 24-hour gain of 13%.

Solana's fast-growing decentralized finance (DeFi) ecosystem is beaming about an ambitious developer project – supposedly set to come to fruition later this summer – that would connect Solana with the Bitcoin blockchain as the latter transforms into a legit DeFi hub thanks to tokenization protocols, Runes and Ordinals (Cointelegraph).

In that same vein, MicroStrategy's Michael Saylor has just announced a Bitcoin project dubbed "Orange protocol" for creating Ordinals-like identity markers (Decrypt).

Skittish U.S. investors yesterday yanked a record $563.7 million from ETFs tied to the price of spot Bitcoin.

Nearly $1.2 billion has exited 11 ETFs since last week.

Fidelity’s FBTC led the losers with $191.1 million worth of withdrawals.

"This might be alarming to bulls," CoinDesk said.

Wall Street experienced an "oh well, better than nothing" lift when Fed Chairman Jerome Powell at least seemed to rule out the possibility of an interest rate hike.

Risk-on traders wouldn't have conceived of a rate increase heading into 2024. Most were thinking a rate reduction campaign was set to begin and that exuberance would ensue, but inflation became the unwanted houseguest who wouldn't leave – and so now it seems if there is to be any cutting, it'll not happen until September at the earliest, or so goes conventional wisdom.

With all of their analytics and unlimited access to economic data points, the Fed keeps misjudging inflation, initially calling it transitory (owing to pandemic-bred supply shocks) while dragging their feet when it came time to pump the brakes. That inflation came down as fast as it did in 2023 seemed to catch policymakers off guard, too, as did this recent-month stubborn streak.

"Higher for longer is the Fed’s mantra,” said AllianceBernstein economist Eric Winograd. “We are past the higher part and into the longer."

A loosening of money supply is perceived as a booster shot for risk assets, such as stocks and cryptos, and this apparent eventuality, alongside catalysts such as the halving and the opening of ETF floodgates, together fomented a speculative environment so manic that "BTC $250K" predictions became passé. The edge of outer space replaced the sky in terms of metaphorical limitations. Extraordinarily bullish analyst Plan B went from having a monopoly on the vertigo-inducing forecast market to basically being lost in the shuffle.

Even Standard Chartered, known for wildly bullish outlooks, now says that BTC’s breach of the $60K support level could be seen as opening a path to the low $50K range, not unlike the way a gash in a luxury steamer's hull could be seen as potentially a challenge to adjacent watertight compartments. 

As for Plan B, the analyst's artful-math-bred positivity remains intact. He recently expressed confidence BTC would reach $100K this year, a forecast driven in part by the high probability of mining revenue increasing post-halving (following a historical bust/boom pre/post-halving trend), and by the insights gleaned from the stock-to-flow predictive model that continues to suggest BTC's scarcity is rising.

A current BTC price in the neighborhood of at least $55K is basically in line with what the model (tweaked and re-tweaked over the years) predicted back in 2019, Plan B insists.

The most recently updated version of the model’s parameters, per Finbold, maintains an average BTC target price of $500,000 between 2024 and 2028.