Key Points:
Despite concerns about an economic recession, demand from institutional investors and corporate adoption may drive Bitcoin prices higher.
Investor belief that the Federal Reserve will maintain interest rates is favorable for Bitcoin's upward price movement.
Global stock markets reacted positively to news of a pause in import tariffs between the U.S. and the EU, with the S&P 500 index rising 1.5% on May 27. However, concerns about a global economic recession still exist, limiting Bitcoin's upside potential, especially considering that the U.S. benchmark import tax rates have been raised in most regions.
Given the increasing uncertainty about the economic situation, Bitcoin's price hovering around the $110,000 level has surprised investors, as it solidifies its position as one of the top six tradable assets by market capitalization globally. Investors are now questioning whether Bitcoin is becoming anti-fragile or if it is inevitable for it to fall below $100,000 in a recessionary environment.
Traders currently estimate a 41% probability that the Federal Reserve will maintain interest rates unchanged before September, a significant increase from just 2% a month ago.
CME FEDWatch Target Rate Probability. Source: CME
Typically, higher capital costs are bearish for risk assets like Bitcoin. However, in this context, it also suggests that the Federal Reserve may inject liquidity due to the poor fiscal outlook in the U.S., where government spending exceeds revenue capacity.
U.S. President Donald Trump has called for lower interest rates, but Federal Reserve Chairman Jerome Powell remains cautious due to a strong labor market and rising inflation pressures, regardless of whether these pressures are driven by tariffs or loose credit conditions. This tension helps explain why the S&P 500 index has struggled to return to its historical high of 6,147 points from February, and why Bitcoin's upside potential is also limited.
Bitcoin's current market capitalization of $2.2 trillion has surpassed that of Google and Meta, which partly explains the resistance level at $112,000. However, it is inaccurate to claim that Bitcoin has decoupled from traditional markets; over the past four weeks, its 30-day correlation with the S&P 500 index has remained above 70%. Therefore, if the stock market enters a bear market, Bitcoin may also face downward pressure.
30-Day Correlation: Bitcoin/USD vs. S&P 500 Futures. Source: TradingView / Cointelegraph
Companies are currently releasing their first-quarter earnings reports, a period that predates the escalation of the trade war. Therefore, the stock market may take longer to reflect the full negative impact, even though macroeconomic indicators have shown signs of contraction. The reported 6.3% decline in U.S. durable goods orders for April on May 27 may be the first signal of economic weakening.
U.S. Durable Goods - New Orders for April. Source: U.S. Census Bureau
However, even if corporate first-quarter earnings fall short of expectations, it does not necessarily mean that the S&P 500 index will be significantly harmed. In fact, disappointing results may open the door for faster interest rate cuts, which often benefit companies by lowering financing costs and potentially stimulating consumer demand.
The risk profile of Bitcoin seems to have improved, following the announcement by Trump Media Technology Group to acquire Bitcoin after completing a $2.5 billion mixed debt and equity financing. According to Reuters, Trump Media CEO Devin Nunes stated, "We view Bitcoin as the top tool for financial freedom." This significant development indicates that Bitcoin's trajectory towards the $112,000 price level is not solely directly related to macroeconomic growth.
The growing interest from institutions and corporations in Bitcoin adds a new dimension to its market behavior. While macroeconomic trends and correlation with traditional assets remain important, Bitcoin is increasingly being positioned as a strategic asset with value beyond speculation. Therefore, as more influential companies and investors widely adopt it, Bitcoin's performance may partially decouple from the stock market.
While the stock market may still be sensitive to macroeconomic data and changes in corporate earnings, Bitcoin's upside potential seems to rely more on a combination of factors, including monetary policy, institutional investor positioning, and its emerging role as a hedge against systemic financial risk.
Related: Senator Lummis: Trump Supports Bill for Acquisition of One Million Bitcoin (BTC)
Original: “Bitcoin (BTC) Price Held Up by Corporate Adoption and Inflation Hedge Narratives”
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