First Mover Asia: Bitcoin Poised to Reach $25.2K in the Near Future: Strategist

An Asset Market in Search of a Good Story

Banking substitute? Inflation hedge? Gold alternative?

Brent Xu, the CEO and co-founder of Web3 bond-market platform Umee, shared his insights on Bitcoin's current situation during an episode of CoinDesk TV's "All About Bitcoin" program. He mentioned that Bitcoin has been stagnant in its price movement, hovering between the range of $25,000 to $30,000 for several weeks. Xu further explained that Bitcoin is still searching for a new support level that can potentially drive its price in a different direction.

“Bitcoin is trying to find its next narrative,” Xu said.

Bitcoin's vulnerability to external events was demonstrated once again on Wednesday, as its price experienced significant fluctuations. Despite an initial surge on the back of a relatively positive Consumer Price Index (CPI) report, which showed a lower-than-expected 4.9% increase in inflation for April, BTC soon plummeted due to rumors circulating online about a potential $320 million bitcoin sell-off by the U.S. government. However, the market eventually shrugged off the unfounded hearsay, leading to a strong recovery for Bitcoin. This episode serves as a reminder of the cryptocurrency's susceptibility to external factors, and the importance of remaining vigilant and well-informed in the constantly evolving crypto landscape.

Xu observed that the price surges that resulted from the recent series of U.S. bank failures, both in April and more recently, were unable to create a lasting price momentum. This indicates that while such events may generate short-term market reactions, they may not be significant enough to have a sustained impact on the overall cryptocurrency market.

“We saw a bunch of banks get destroyed, and there's this narrative building that bitcoin will be a new banking system,” he said. “Unfortunately, that narrative is still not fully substantiated.Bitcoin is oscillating during the existing market cycles, and we haven't reached that bullish momentum cycle yet.

He added: That is likely to happen next year. For the rest of this year, we're gonna see some more price oscillation.”

Xu is of the opinion that the gradual decrease in inflation since its peak of 9.1% in June last year could prompt the U.S. central bank to re-evaluate its policy of consistently increasing interest rates, which some critics attribute to the near-banking crisis and other economic problems. "There's a likelihood that we're going to see some potential cuts," Xu said, further noting that some analysts have predicted interest rate cuts totaling 75 basis points (bps) in the coming months. This suggests that the U.S. Federal Reserve may be considering a shift in its monetary policy, which could have significant implications for the broader financial markets.

“They need to take a long hard look at what all these interest rates hikes have been doing, and just the possibility of a deeper recession into the near future,” he said.

Xu emphasized the significance of liquidity for the flourishing of cryptocurrency markets. However, there has been a recent retreat from crypto trading in the United States by market makers Jane Street and Jump Crypto. Other companies with a strong focus or interest in crypto have also been reducing their involvement or considering relocating abroad.

But Xu said that “these markets will find a way to exist, if not within U.S. borders,” and added that “there will be institutional liquidity that comes in.”

“It’s just building the right narrative. The next narrative needs to be a major innovation, like the Shanghai Shapella upgrade, or some sort of new L-2 (layer 2), or some major improvement to the bitcoin blockchain. And when we see those, we'll see more liquidity and action coming (into markets).”