Bitcoin (BTC) and other store of value assets will remain in high demand due to the United States government’s overspending and high interest rates, according to Zach Pandl, the managing director of research at Grayscale. Pandl believes that persistent inflation and unsustainable budget deficits will drive the demand for assets like Bitcoin. He also mentioned that the Federal Reserve is unlikely to reduce interest rates in the near future due to the current high inflation. However, upcoming events like the Bitcoin halving, expected on April 20, along with economic growth and increased crypto adoption, will contribute to the rise in Bitcoin’s price.
In March, inflation rose by 0.4% month-on-month and 3.5% year-over-year, which is higher than the estimates from Dow Jones economists. Pandl’s concerns about high inflation rates hindering the Fed’s ability to lower interest rates were echoed by Ernst & Young chief economist Greg Daco. He stated that policymakers will have to sustain a higher-for-longer monetary policy stance due to the increased inflation rates.
Pandl also mentioned that although an increase in the real interest rate may negatively impact cryptocurrencies in the short term, there will still be a continued demand for store-of-value assets in the long term. The 10-year real interest rate has seen significant spikes in the past, leading to a drop in Bitcoin’s price. For example, from December 2017 to January 2018, the 10-year real interest rate surged by 52.35%, causing Bitcoin’s price to decline by 28%.
After the recent release of CPI information, Bitcoin experienced a minor decrease in its price, reflecting investor sentiment. However, Bitcoin’s price has since rebounded and is currently standing at $70,640. Crypto analyst Matthew Hyland identified an ascending triangle formation on Bitcoin’s price chart, indicating that it has established a new resistance level above $71,500.
Overall, the demand for store of value assets like Bitcoin is expected to remain strong due to factors such as inflation, economic growth, and increasing adoption.