Okay, let's cut the crap. Bitcoin's blasting past $103,000. What, are we all of a sudden financial Nostradamuses forecasting stagflation? Or are we simply seeing the purest, distillate form of ETF hype in action. I'm leaning heavily toward the latter, and here's why.
ETF Inflows: The Real Game Changer
Stagflation is a scary word. Slow growth and high, persistent inflation – nobody wants that. And yah, the story – which I’ve written about – of Bitcoin as “digital gold,” a safe haven from a collapsing dollar, is alluring. The timing couldn’t be more convenient. As a result, most of bitcoin’s price action is being driven by the exciting prospect of capital pouring into those shiny new ETFs. This wave of investment goes beyond any aggregate economic forecasts.
Think about it. BlackRock’s IBIT by itself raked in $69 million on May 8th. FBTC snatched $35.3 million while ARKB followed with $13.1 million. That's one day. And it’s not just retail investors hurling money like monkeys with peanuts. This is institutional money finally getting off the sidelines.
It's a simple supply and demand equation. Restricted Bitcoin supply + skyrocketing ETF demand = price moon shot. Dramatically.
Gold's Loss, Bitcoin's Gain?
Here's an unexpected connection for you: gold used to be cool. Remember GLD, the SPDR Gold Shares ETF? It was the safe haven of choice for decades. As of now, BlackRock’s IBIT has beaten GLD in net inflows since the start of the year. Ouch.
Is this a permanent shift? Is Bitcoin actually dethroning gold as the new superior store of value? Maybe. But I have a hunch that there’s a big component of novelty and FOMO (Fear Of Missing Out) behind this trend. Bitcoin ETFs are the new, shiny toy. They are easier for mainstream investors to get into and they have the added allurement of potentially astronomical returns.
We aren’t suggesting that Bitcoin is not a shop of value. It has a capped supply, a distributed ledger, and an expanding ecosystem. Let’s be clear: its current moment isn’t due solely to bitcoin’s undeniable attributes as a hedge against global economic collapse. There are more complex forces in play making this increase inevitable. It’s not just about equity, but the perception of easy money.
Since we’re on the subject of crypto exuberance, we’d better not leave out Ethereum’s almost 20% surge. The Pectra upgrade, no issues there, staking is up and running, and the murmurs of an Ethereum ETF approval are growing louder.
| Feature | Gold (GLD) | Bitcoin (IBIT) |
|---|---|---|
| Age | Decades | Few Months |
| Tangibility | Real | Digital |
| Volatility | Low | High |
| "Cool Factor" | Low | High |
Ethereum's Party: A Risky Bet?
Let's not get carried away. As many of these members tweeted, the SEC’s approval of Ethereum ETFs is far from a done deal. Closed-door meetings don't guarantee anything. And even if they do approve them, an Ethereum ETF wouldn’t spark the same kind of explosive impact as the Bitcoin ETFs. One Ethereum has a more complicated use case, so the value prop isn’t as readily grasped by the average investor.
Here's the hard truth: the crypto market is still driven by speculation and hype. I’m not suggesting that it’s some sort of house of cards. As much as I have praised it, let me strongly urge you to read it with a critical eye.
The various arguments over fears of stagflation or ETF mania is not an either/or proposition. Both of those factors merit serious reflection and study. Both factors are likely playing a role. In my opinion, it’s the ETF inflows that are the main culprit here. The market as represented by the S&P 500 is well above the 200-day moving average and the RSI is nearing 70 signaling overbought conditions.
So have fun out there, but don’t unbuckle that seatbelt. This could be a wild one. And always keep in mind, past performance is no guarantee of future results. Especially in crypto.
- Don't FOMO: Resist the urge to jump into Bitcoin or Ethereum just because the price is going up.
- Do Your Research: Understand the risks and rewards of investing in crypto before putting your money on the line.
- Diversify: Don't put all your eggs in one basket. Crypto should be just one part of a well-diversified portfolio.
Ultimately, the question of whether stagflation fears are justified or if this is just ETF mania is a false dichotomy. Both factors are likely playing a role. But in my view, the ETF inflows are the primary driver. The market is above the 200-day moving average and the RSI is approaching 70.
So, enjoy the ride, but keep your seatbelt fastened. This could be a wild one. And remember, past performance is not indicative of future results. Especially in crypto.
