The crypto community has been celebrating Bitcoin’s phenomenal rally to $35,000 last month, with many cheering up for the spot Bitcoin ETF approval. However, QCP Capital believes that the actual reason behind the Bitcoin price rally was the macro forces.

Macro-Driven Bitcoin Price Rally

QCP Capital noted that the recent cryptocurrency rally, in contrast to previous surges linked to spot ETF developments, was predominantly influenced by macroeconomic factors. This shift was prompted by a lower-than-expected Treasury supply estimate in the first quarter and a dovish stance from the Federal Open Market Committee (FOMC), leading to a decline in bond yields and a simultaneous rise in risk assets.

It’s important to note that while this rally is significant, its potential to initiate a sustained global uptrend in equities and bonds remains uncertain, as the broader macroeconomic landscape has not fundamentally shifted, except for the correction of excessively bearish bond sentiment.

As the spot price of Bitcoin continues its upward trend, derivative indicators such as perpetual funding rates, term forwards, implied volatility, and risk reversals remain at elevated levels. Traders positioning for a potential breakout driven by derivatives are eagerly awaiting the approval of a spot ETF, which could serve as a catalyst for further gains.

In the coming days, important events like earnings reports from Coinbase and Apple, as well as the release of non-farm payroll (NFP) data, could provide the necessary impetus to realize the expected implied volatility and particularly high call option premiums, noted QCP.

However, QCP Capital adds that its essential to acknowledge the excitement around the approval of a spot ETF. Simultaneously, it would likely take significant regulatory actions, led by SEC Chair Gary Gensler, to push the market below the 32k support level at this stage.

BTC Volatility

Jurrien Timmer, the head of macros at Fidelity presents an interesting chart comparing Bitcoin’s volatility with other asset classes over the last three years. He added that Bitcoin often faces criticism for its high volatility, but this characteristic, while leading to significant drawdowns, also results in substantial gains. In the chart below, you can see the drawdowns (measured from the two-year high) on the left, and the gains (measured from the two-year low) on the right, based on last week’s weekly data.

While Bitcoin has experienced a 54% decline from its two-year high, it has also witnessed an 84% increase from its low point. When you consider this risk-reward ratio, it outperforms government bonds and many other asset classes, at least at this point in time. For comparison, take a look at gold, which is down just 1% from its two-year high but has also risen by 22% from its two-year low.

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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.