A bitcoin rally to the mid-$30,000 region is in sight unless central bank tightening kills risk appetite. The world's largest crypto by market capitalization surged to its highest level in more than a year on Friday, rising 4.4% to $31,191 at 12:19 p.m. in New York.
"Bitcoin momentum could make a run towards the mid-$30,000 region, but if central banks globally remain hawkish, that could kill risk appetite," Ed Moya, senior market analyst at OANDA, said in a note.
Bitcoin is holding onto gains that came after multiple spot Bitcoin ETF filings have signaled a flurry of institutional interest in the asset class.
Short-sellers have been squeezed amidst optimism the U.S. Securities Exchange Commission might finally be ready to approve BlackRock's planned spot bitcoin ETF. But macroeconomic headwinds are gathering strength, with this week's rate hike by the Bank of England and the European Central Bank promising another increase in July.
U.S. inflation data
Konstantin Anissimov, an independent digital asset analyst, pointed to next week's release of U.S. inflation data and warned that the "data will be closely watched by investors, with a hotter reading having the potential to kill risk appetite, as it would signal that inflation is still a major problem."
Conversely, Annissimov stated that a lower inflation reading could invalidate the Federal Reserve's case for more hikes.
"If inflation is coming down, it means that the Fed's current monetary policy is working," he said. "This could lead the Fed to slow down its pace of rate hikes, or even pause them altogether."
The analyst suggested that if recent applications for spot bitcoin ETFs by several major financial institutions are processed by the SEC, "it would create a clear and positive stance from the SEC that would allow many of the large institutional investors to fully utilize this asset class."
BlackRock filing for spot bitcoin ETF
Rubicon Crypto CEO Gregory Johnson is cautious about the possibility of BlackRock gaining approval for its ETF in the near future.
"The collective industry opinion in many circles has been the reluctance by the SEC to give a first mover advantage to any one firm," Johnson told The Block.
"If ever there was a submission that would break through the log jam at the SEC, it is the recent spot bitcoin ETF filing by BlackRock," he said.
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