Bitcoin rallied above $65K, but will BTC price hold this level?

Bitcoin’s price dropped to $62,705 in the early hours of Sept. 26, causing bulls to temporarily lose hope after the third rejection at the $64,000 resistance level in just four days. However, the tide shifted as the United States stock market opened, propelling the S&P 500 index to a new all-time high. Bitcoin (BTC) soon followed, gaining over 3% to reclaim the $65,000 level.

Some market analysts believe that Bitcoin’s path to $70,000 has been reinforced by macroeconomic trends, including lowered interest rates in the US and renewed interest from long-term institutional investors. Essentially, fears of a stock market bubble have been fading after signs of robust economic growth paired with US housing prices reaching an all-time high.

Rally in tech stocks and monetary policy changes impact investor sentiment

The technology sector has been the main driver of global stock market gains, with several companies achieving over 30% gains in the last six months. Notable companies include Alibaba, Tesla, Nvidia, Taiwan Semiconductor and Apple. Michael Matousek, head trader at US Global Investors Inc., told Bloomberg: 

“AI is still there, but I think people got a little too excited, a little too over-hyped in terms of what we can expect in the near term.”

On Sept. 24, Lyn Alden, an investment researcher and the founder of Lyn Alden Investment Strategy, highlighted that Bitcoin is the most correlated asset with changes in the global monetary base (M2). Historical data shows that Bitcoin’s price increased in 83% of cases over a 12-month period when liquidity was added to bank deposits and circulating money. By contrast, gold followed M2’s direction in just 68% of the previous 10 years.

This data, while favorable for Bitcoin — especially as governments begin deploying stimulus measures after an 18-month hiatus — also benefits the stock market. The S&P 500 index shows an 81% correlation with changes in the monetary base, according to the same study. Consequently, rather than proving itself to be an uncorrelated asset, this cycle may further consolidate Bitcoin as a hedge against governments’ relentless money-printing policies.

The favorable momentum in the US stock market on Sept. 26 was largely driven by memory chip supplier Micron, a critical player in the artificial intelligence supply chain. Micron raised its quarterly revenue guidance to $8.9 billion, up from a previous estimate of $8.5 billion. The company predicts that demand for chips used in AI data centers will increase fivefold by 2025, providing a degree of reassurance for investors, particularly those heavily reliant on the tech sector.

Bitcoin looks less risky

Further boosting investors’ risk appetite was the third estimate of US gross domestic product growth for the second quarter, which came in at 3%, according to Yahoo Finance. This supports expectations of a 2.9% annualized growth rate for the third quarter. Additionally, China’s newly announced economic stimulus measures resulted in the largest weekly surge in the CSI 300 stock index in over a decade.

Related: Bitcoin $73.7K breakout ‘imminent,’ sell-off intensity ‘might vary’ — Analyst

However, the most significant recent development affecting Bitcoin’s momentum was the $242 million inflow into spot Bitcoin exchange-traded funds (ETFs) over just two days. Investors had been skeptical that institutional demand would gain traction, especially after BlackRock’s iShares Bitcoin Trust ETF saw only $5 million in inflows since its launch on Aug. 27, based on Farside Investors data.

Bitcoin’s climb past the $65,000 mark is being driven by favorable macroeconomic trends, rising institutional demand and renewed strength in the tech sector. The substantial inflows into Bitcoin ETFs suggest a shift in investor sentiment and a reduction in perceived risk, potentially setting the stage for a Bitcoin rally toward $70,000.