Bitcoin rebound soon? Four factors fuel the price right now

Bitcoin sellers are exhausted and the war in Iran is wreaking havoc on markets, but analysts warn against counting out Bitcoin just yet.

David Brickell and Chris Mills, analysts at the London Crypto Club, said that, while there's doom and gloom in markets, Bitcoin still has a lot going for it.

“Bitcoin has outperformed virtually every macro asset, aside from oil, since the outbreak of the war,” the pair said in a Monday newsletter.

Here are four factors market watchers say drive the price right now.

Iran war

The US is ramping up its war footing against Iran. The country is assembling roughly 50,000 troops in the region as it eyes reopening the Strait of Hormuz and potentially seizing Kharg Island, a critical hub for Iranian oil exports.

The uncertainty of the conflict weighs on markets. The S&P 500, a key benchmark for the global market, is down 7% year-to-date to levels not seen since August. On Monday, over $1 trillion in value was wiped out from the US stock market in a single trading session.

Even gold is down. The asset is globally seen as the premier safe-haven during troubled times. The metal is heading towards its worst month since 2008. The precious metal is down 15% this month.

Yet Bitcoin is still outperforming gold. It is down just 0.2% over the past month.

A slew of analysts told DL News last week that this fact is incentivising institutional investors to bet even more on the top crypto — especially as they expect things to get better soon.

Brickell and Mills noted that, while some say the cryptocurrency’s latest downturn proves that it has failed as a hedge against fiat debasement, it is still up 10 times over since 2020.

“Bitcoin, as a non-sovereign, borderless asset, remains the ultimate hedge against the failure of existing economic and political structures,” they wrote.

Fed worries 

The war has worried central banks around the world. Traders are now pricing in that the Federal Reserve and others will raise interest rates to fight inflation stemming from skyrocketing energy prices.

Higher interest rates incentivise investors to buy and hold bonds for risk free yield, rather than gamble with riskier assets like Bitcoin.

Investors are “worried over the increasingly drawn-out nature of the Iran conflict and the prospects of higher inflation, with the June FOMC interest rate expectations now having flipped from rate cuts to rate hikes,” wrote James Butterfill, head of research at CoinShares.

Yet, Brickell and Mills argue that this approach is foolish.

Attempting to curb short-term inflation by suppressing demand through monetary policy is “akin to burning down the house to cook the turkey,” they said. “Hiking rates doesn’t help re-open the Strait of Hormuz.”

Institutional interest 

Despite the market worries, institutional investors seem to be betting on Bitcoin and other crypto assets.

In March, investors poured  $1.2 billion into Bitcoin exchange-money funds this month, making March the best month since October, DefiLlama data shows.

On March 27, Paul Howard, a senior director at high-frequency crypto market maker Wincent, told DL News that private over-the-counter deals, usually conducted between institutions like hedge funds, have spiked.

Now, even highly conservative institutions like pension funds and university endowments are pouring capital into Bitcoin ETFs and digital asset treasuries to get exposure to crypto.

They’re expected to pile up to $13 trillion into Bitcoin investments alone by 2030, according to Ark Invest.

Four-year cycle over?

The four-year cycle that has ruled the industry refers to Bitcoin’s halving event. Every four years, the Bitcoin blockchain cuts the amount of rewards it issues to the network’s miners.

If previous cycles are anything to go by, sell-offs usually ebb after six months, which would be around April or May this time around.

Yet Bitcoin has entered a “controlled de-risking” phase, Brickell and Mills said in their newsletter.

“Realised profit-taking has collapsed by 96% since last year — a textbook signal that the ‘seller exhaustion’ we’ve been looking for is finally here.”

Today, the reward for confirming blocks of transactions is 3.125 Bitcoin. By the middle of 2028, at the next forecast halving, those rewards will drop to approximately 1.56 Bitcoin.

Lance Datskoluo is DL News’ Europe-based markets correspondent. Got a tip? Email him at lance@dlnews.com.