BlackRock’s spot Bitcoin exchange-traded funds (ETF) iShares Bitcoin Trust has been experiencing inflows for 69 consecutive days. This coincided with the fourth Bitcoin halving event, which occurred at block height 840,000, reducing the mining reward from 6.25 to 3.125 bitcoins. The halving event is part of a strategy to limit the total supply of Bitcoin to 21 million, enhancing its scarcity by halving the influx of new coins into circulation. Data from Farside Investments shows that Bitcoin ETF flows are gaining momentum after a slowdown in inflows following the bullish Bitcoin halving event.
The recent geopolitical tensions in the Middle East, particularly the Israel-Iran conflict, have impacted the Bitcoin price. Last week, Bitcoin experienced a sell-off and volatility due to the military situation in the region. Bitcoin is typically considered a hedge against global uncertainty, but in times of conflict, portfolio managers may reduce exposure to high-volatility assets, such as Bitcoin, to decrease portfolio volatility. Bitcoin’s price remained relatively stable around $66,300 despite the market impact of the conflict, showing resilience in the face of geopolitical events.
The Bitcoin price movements driven by macro events, such as geopolitical tensions and the strengthening of the Dollar, may have short-lived impacts on financial markets. Basile Maire, co-founder of D8X, a decentralized exchange, noted that Bitcoin’s price fluctuations related to macro events are largely driven by Bitcoin ETF trading rather than crypto-native trading. The introduction of ETFs seems to increase the impact of macro events on Bitcoin prices. While Bitcoin and other cryptocurrencies may experience sharper declines compared to traditional assets in certain situations, this does not negate the long-term potential of Bitcoin as a hedge against global uncertainty.
The impact of macro events on Bitcoin prices points to the role of Bitcoin ETF trading in driving price movements. As global uncertainties, such as geopolitical conflicts and Dollar strengthening, can influence Bitcoin’s price, portfolio managers may adjust their exposure to high-volatility assets like Bitcoin to manage risk. The strengthening of the U.S. Dollar, for example, can lead to a flight to safety, prompting portfolio managers to reduce exposure to assets with high historical volatility, such as Bitcoin. Despite short-term price fluctuations, Bitcoin’s resilience and potential as a hedge against global uncertainty remain intact in the long run, supporting the case for its continued adoption and investment by institutional investors.
