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bitcoin falling out of boat in storm
March 25, 2024

Bitcoin Volatility is Back with a Vengeance!

March 25, 2024

Bitcoin navigated turbulent waters last week amidst interest rate anticipation and significant outflows from Spot ETFs. 

The Federal Reserve’s decision to maintain interest rates, coupled with projections for rate cuts throughout 2024, sets the stage for market unease amid concerns over accelerating inflation. 

Meanwhile, Bitcoin’s resilience faced a test as outflows from GBTC escalated, casting a shadow over market sentiment. 

However, amidst this backdrop, a surge in volatility signaled bullish optimism, MicroStrategy made waves as it joined the 1% club, and BlackRock unveiled its pioneering tokenized asset fund, ‘BUIDL’, that leverages the Ethereum blockchain.

Bitcoin battles interest rate anticipation and ETF outflows

In a week marked by anticipation surrounding the Federal Reserve’s stance on interest rates and significant outflows from the Grayscale Bitcoin Trust (GBTC), Bitcoin has navigated through turbulent waters.

The Federal Reserve, in its latest Federal Open Market Committee meeting, opted to maintain interest rates at 5.25%-5.5%, aligning with market expectations. 

US Fed Funds Rate from 2014 to 2024
US Fed Funds Rate from 2014 to 2024

Moreover, policymakers projected a steady path for rate cuts throughout the year, foreseeing a decrease to 4.6% by the end of 2024. 

While this decision eased concerns of a more hawkish approach, it also hinted at potential challenges ahead, particularly in light of recent economic indicators such as the Consumer Price Index and Producer Price Index reports, which surpassed expectations, stirring fears of accelerating inflation.

Bitcoin initially surged past $64,000 following the Fed’s announcement, offering a glimpse of optimism for investors. 

However, market sentiment took a downturn amidst reports of escalating outflows from the Grayscale GBTC, marking the first week of net negative flows since late January for U.S.-listed spot bitcoin ETFs. 

The cryptocurrency faced intensified volatility, slipping below $63,000 during the U.S. session on Friday amid a broader sell-off across the market. 

The significant outflows from GBTC, totaling over $830 million throughout the week, have contributed to the market unease. 

Notably, Thursday saw GBTC experiencing $359 million in outflows, leading to a substantial decrease in net inflows across the fund group. 

Analysts suggest that Genesis selling shares as part of its bankruptcy process might fuel this trend. 

However, there is optimism that as these sales conclude, ETF inflows could rebound, especially amidst favorable macroeconomic conditions and accommodative central bank policies.

Summary of Bitcoin ETF flows
Summary of Bitcoin ETF flows

Bitcoin market optimism resurges as volatility increases

The Bitcoin market is witnessing a surge in volatility that has some analysts buzzing with excitement. 

According to data collected by Ecoinometrics, since the dawn of 2023, Bitcoin has been on an impressive ascent, marking a remarkable 285% increase in value. 

The momentum has only intensified since the beginning of this year, with Bitcoin notching up a 50% surge, culminating in a new historic pinnacle at $74,000.

However, the resurgence of Bitcoin’s bullish stride didn’t transpire overnight; it has been a gradual progression spanning over a year. 

Since the debut of Spot Bitcoin ETFs in early January 2024, a familiar on-chain activity pattern has emerged, indicative of a flourishing market. 

Specifically, volatility, which has long been considered a hallmark of bull markets, has made a resounding comeback.

During Bitcoin’s recovery phase, following the trough of the bear market, volatility had been on a downward trajectory. 

Yet, this trend has now been upended, with volatility reclaiming its place in the market dynamics. 

Rather than a cause for trepidation, this resurgence in volatility is embraced as an inherent characteristic of bull markets.

Indeed, volatility should not be viewed through a lens of fear; instead, it presents an opportunity for greater upside potential, particularly for those willing to adopt a broader perspective. 

Bitcoin volatility from 2020 to 2024
Bitcoin volatility from 2020 to 2024

MicroStrategy joins the 1% club

According to Executive Chairman Michael Saylor, MicroStrategy, the business intelligence provider, has acquired an additional 9,245 bitcoins, amounting to $623 million, or roughly $67,400 per coin. 

This acquisition propels MicroStrategy’s total bitcoin holdings to approximately 214,246 BTC, a milestone that now represents more than 1% of the entire 21 million bitcoin supply envisioned to ever exist.

The procurement was facilitated through a combination of $592.3 million generated from MicroStrategy’s recent convertible debt offering and $30.7 million in surplus cash reserves. 

With this latest investment, MicroStrategy solidifies its position as a significant player in the cryptocurrency market.

At current market prices, MicroStrategy’s bitcoin holdings are valued at $13.5 billion, a testament to the company’s steadfast commitment to digital assets. 

Since initiating its foray into Bitcoin, MicroStrategy has allocated approximately $7.53 billion towards amassing its BTC trove, with an average purchase price of $35,160 per coin.

Despite news of the substantial investment, MicroStrategy’s stock experienced a downturn during the week.

With bitcoin’s value dipping to $63,000 in the following days, MSTR shares have declined by over 10% throughout the week. 

This decrease marks a 25% deviation from the company’s recent record high achieved just days ago.

MicroStrategy/Bitcoin ratio that shows the comparative value ratio between MicroStrategy’s stock price and the price of Bitcoin

BlackRock launches the ‘BUIDL’ tokenized asset fund on Ethereum

BlackRock, the global investment powerhouse, has revealed its groundbreaking venture into tokenized asset management. 

Dubbed ‘BUIDL’, this innovative fund is poised to redefine investment strategies by leveraging the Ethereum blockchain, marking BlackRock’s inaugural foray into public blockchain-based fund issuance.

Tweet from Altcoin Daily announcing BlackRock’s new fund
Tweet from Altcoin Daily announcing BlackRock’s new fund

The initiative, initially registered as the BlackRock USD Institutional Digital Liquidity Fund in the British Virgin Islands last year, aims to revolutionize investor access to blockchain offerings. 

By enabling seamless issuance and transparent trading of ownership on the Ethereum network, BUIDL promises instant settlement and cross-platform transfers, augmenting the accessibility and efficiency of investment opportunities.

While the announcement sets a minimum investment threshold of $5 million, exceeding expectations outlined in its SEC filing, the fund’s application values ranged broadly from $1 to $100 million. 

To bridge the gap between Ethereum and traditional financial markets, BlackRock has partnered with Bank of New York Mellon, a renowned provider of investment services, to serve as custodian and administrator of the fund’s assets.

Moreover, BlackRock’s collaboration with Securitize Markets, LLC, an SEC-registered transfer agent, underscores its commitment to harnessing the transformative potential of tokenized securities. 

BlackRock has not only invested in Securitize but also appointed Joseph Chalom, BlackRock’s global head of strategic ecosystem partnerships, to the Securitize board of directors, signaling a deepening partnership between the two entities.

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