• Bitcoin (BTC) is benefiting from instability in the financial system, falling inflation and regulatory overhang on stablecoins.
• Investors are shifting from higher beta or more volatile cryptocurrencies into BTC and from stablecoins to BTC.
• The Fed’s policy of raising rates has led to falling prices of Treasurys, lowering the value of USD and making BTC more attractive as an investment.
Bitcoin Benefits From Crypto’s Flight To Quality
Instability in the financial system is driving investors towards bitcoin, according to crypto-services provider Matrixport. Traders and investors have shifted away from both higher beta cryptocurrencies and stablecoins into bitcoin due to a variety of factors.
Surviving Falling Inflation
The Federal Reserve’s interest rate policy has severely damaged some investment portfolios and threatened the financial stability of the economy, leading many investors to flock towards bitcoin for safety. As long as these trends persist, bitcoin prices can stay high and continue rallying.
Stablecoin Regulatory Overhang
Regulatory scrutiny around Paxos Trust’s binance USD (BUSD) caused funds to move out of that currency into BTC, while Circle Internet Financial’s USD coin (USDC) lost its peg when money flowed out.
Falling Treasury Prices
The Fed’s policy of raising rates has led to falling prices in U.S. Treasuries which lowers the value of the U.S. dollar relative to other currencies – thereby making investments in other assets such as bitcoin more attractive.
The combination of these factors leads Matrixport researcher Markus Thielen to conclude that “investors have now woken up” regarding cryptocurrency investments – with bitcoin being one particular asset that benefits from this flight to quality.