Bitcoin price rally driven by macroeconomic headwinds, not just spot BTC ETF flows — Analyst

Key takeaways:

• Bitcoin demand is driven by investors’ macroeconomic fears, not just spot BTC ETF netflows.
• Global bond market volatility is boosting Bitcoin’s safe-haven appeal, with interest rate cuts and rising inflation triggering a shift into risk assets.

Crypto analysts say investors’ interest in Bitcoin (BTC) is increasingly tied to its role as a hedge against geopolitical and financial instability.

In a recent X post, independent market analyst Adam noted that the primary driver for Bitcoin’s upside is not institutional investors purchasing of the spot BTC ETFs, but the broader macroeconomic shifts sparked by rising inflation, bond market volatility, and the uncertainty caused by economic policies like US President Donald Trump’s trade war.

Bitcoin price has rallied since the US tariffs went into effect. Source: Adam/XAdam highlighted that Bitcoin has rallied over 50% since Q1, coinciding with the imposition of new tariffs. This performance has reinforced the view of Bitcoin as a safe-haven asset amid intensifying geopolitical tensions and economic uncertainty. Analysts like Capital Flows argue that the current bull case is fundamentally rooted in macroeconomic conditions rather than ETF flows.

Related: Bitcoin eyes ‘healthy pause’ around $106K before price picks up steam

Macro tailwinds impact Bitcoin demand

Global macro researcher Capital Flows pointed out that the ongoing BTC rally has mirrored a significant rise in credit expansion and a shift in bond market dynamics. Central banks, including the European Central Bank (ECB), have started to cut rates despite rising inflation in segments like eurozone services. While the ECB’s policy may reflect concerns over broader economic softness, markets are interpreting these moves differently.

For instance, 30-year interest rate swaps in Europe have risen, suggesting higher nominal growth and inflation expectations. Cointelegraph reported that the US long-term Treasury yields have also surged—30-year rates touched 5.15% in May, while the 10-year rate stood at 4.48%. This “bear steepening” of the yield curve typically indicates that markets are pricing in more vigorous economic activity, not recession.

30-year government bonds. Source: LSEG DatastreamIn Japan, bond market stress is also emerging. The 30-year government bond yield recently hit 3.185%, amid concerns over Japan’s high debt-to-GDP ratio. Combined with the US debt outlook and continued fiscal expansion, investors are increasingly questioning the long-term viability of traditional sovereign debt as a safe store of value.

Bitcoin, by contrast, is gaining attention as a non-sovereign, deflationary asset. In the US, easy financial conditions, captured by the National Financial Conditions Index, have encouraged risk-taking, benefiting Bitcoin. Rising debt levels and the potential for renewed Federal Reserve balance sheet expansion further support the case for crypto assets

Thus, these factors underscore a broader macro narrative: Bitcoin is emerging as a hedge not only against inflation and currency debasement but also against instability in sovereign debt markets. This trend, coupled with projected $420 billion in investment inflows, may continue to drive capital into BTC through the current cycle.

Related: Bitcoin bull market 'great validator' comes as James Wynn loses $100M

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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