- BTC-USD
+5.89% - GC=F
+1.97%
Bitcoin‘s (COIN:BTCUSD) move out of its recent trading range appears to have been driven primarily by improving US regulatory sentiment rather than broader concerns about currency debasement
The bank pointed to the delayed reaction in Bitcoin following the US Treasury’s bond buyback announcement, as well as ether outperforming Bitcoin during the rally, as evidence that the traditional “digital gold” argument was not the dominant catalyst.
“We think U.S. regulatory news is a more durable explanation for the move,” the analysts said.
Citi watches Bitcoin ETF flows for confirmation
Citi said one of the most important indicators over the coming weeks will be whether improving sentiment translates into renewed demand for Bitcoin exchange-traded funds.
ETF inflows have struggled to regain momentum since the liquidations seen last October. According to Citi, a meaningful recovery in flows during the next month could indicate that investors are beginning to price in a more favourable US regulatory environment, even if uncertainty remains over the passage of comprehensive market-structure legislation.
Citi’s base case currently assumes no net ETF flows. Over the longer term, the bank also sees uncertainty around how value will accrue to public blockchain networks if more financial activity shifts towards private blockchains.
Todd Ault, founder of Ault Blockchain, also linked the latest rally to developments in Washington.
“What you are seeing in Bitcoin right now is the market starting to understand how significant this moment could be for crypto in the United States. President Trump putting his weight behind the CLARITY Act is a big deal,” Ault told Investing.com.
Bernstein points to Treasury liquidity as another catalyst
Bernstein offered a different interpretation, arguing that the US Treasury’s decision to increase purchases of longer-dated bonds provided a major trigger for Bitcoin’s advance.
Analyst Gautam Chhugani said cryptocurrency markets had struggled earlier in the year as the Iran conflict tightened financial conditions, while strong investor demand for artificial intelligence and semiconductor stocks diverted liquidity away from digital assets.
However, with growing AI capital expenditure increasingly being financed through debt markets, Chhugani believes greater liquidity could ultimately find its way into Bitcoin as investors seek a hedge.
He also argued that regulatory clarity from the SEC and CFTC “is here to stay with or without the CLARITY Act,” which is scheduled for a September 15 vote.
