Bitcoin has once again captured the attention of global markets as its price surged close to $73,000, despite worrying signs from US economic data.
At the time of writing, Bitcoin is currently trading at $71,864, up 0.04% since it opened early Friday in Asian trading.
In a context of rising inflation and slowing economic growth, this rise seems to defy common sense.
ComScore Observer
Behind this surge, geopolitical tensions between the United States and Iran have once again become a major factor.
Despite the ceasefire being announced, statements from the Iranian side claiming violations of the agreement have reignited global concerns.
The immediate impact can be seen when crude oil prices surged back to around $97 per barrel.
However, investors are not only looking at the geopolitical conflict.
The latest economic data from the United States shows that inflation remains high, with the Personal Consumption Expenditures (PCE) index increasing by 0.4%.
At the same time, Gross Domestic Product (GDP) growth was revised down to just 0.5%.
This combination signals the risk of ‘stagflation’, a situation where the economy is sluggish but prices continue to rise, something that central banks will find very challenging to address.
Ironically, this situation is what has been the catalyst for Bitcoin’s rise.
Investors are now expecting that the US government may have to inject more liquidity into the financial system to avoid a deeper recession.
This could indirectly weaken the value of the US dollar, and in such a situation, scarce assets such as Bitcoin become an alternative option to protect the value of wealth.
Furthermore, despite the concerns about the economy, US stock markets such as the S&P 500 still remain near all-time highs.
If the conflict in the Middle East continues to escalate or oil prices surge higher, market sentiment could change rapidly.
This could potentially push Bitcoin back below $68,000, especially if investors start to aggressively avoid risk.
