Markets
Bonds Beat Bitcoin as Doubts Mount Over Crypto Rebound
(Bloomberg) — Stocks and bonds delivered better returns than Bitcoin this quarter, suggesting a crypto boom is losing steam.
Indicators for global stocks, fixed income and commodities are all ahead of the largest digital asset, which lost around 5% between early April and 1:15 p.m. Friday in Singapore. Gold also showed the token a clean pair of heels.
Bitcoin has retreated after setting a record high of $73,798 in March and bounces back to the top have repeatedly failed. Developments that previously excited animal spirits are now struggling to do so, such as inflows into US Bitcoin exchange-traded funds or optimism about possible interest rate cuts from the Federal Reserve.
For Noelle Acheson, author of the newsletter Crypto Is Macro Now, some of the subscriptions to five-month-old US ETFs may come from existing Bitcoin holders. “In other words, not all ETF inflows represent new money entering the market, and only new money will move the price,” she wrote.
JPMorgan Chase & Co. strategists led by Nikolaos Panigirtzoglou also explored the nature of demand for these products, which have attracted about $15 billion in net inflows so far, according to data compiled by Bloomberg.
They said that “there has likely been a significant rotation from digital wallets on exchanges to the new spot-Bitcoin ETFs.” Excluding that, they estimate this year’s net flow into crypto – including ETFs, fundraising by venture capital portfolios, and the “pull” implied by CME Group futures – at 12 billions of dollars.
“Sceptical” strategists
That’s less than about $45 billion in 2021 and about $40 billion in 2022, the strategists wrote in a note, adding that they are “skeptical” that the current pace of capital inflows will continue in 2024 for the rest of the year.
Bitcoin changed hands at $66,750 on Friday at 1:15 p.m. in Singapore. It has quadrupled since the start of last year in a comeback from a deep bear market in 2022. The token’s biggest backers say prices of $100,000 or more will materialize over time, as critics say crypto is devoid of intrinsic value.
Bitcoin rose 67% in the three months through March, well ahead of traditional asset indices. This quarter, Bloomberg indicators for global bonds, stocks and commodities range from broadly flat to over 5%, enough to outperform Bitcoin.
Sales by Bitcoin miners to cope with tougher circumstances could be another factor behind the token’s recent torpor, Acheson said. Miners receive the token as a reward for using powerful computers that support the digital ledger. Rewards are halved every four years and the latest reduction in April created a more difficult backdrop for mining companies.
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