By Marcus Soterio, analyst A publicly listed digital asset broker GlobalBlock (TSXV: Block).
Bitcoin remains above $20k as US GDP for Q3 registers 2.6%, beating expectations of 2.4% and a sharp increase from the previous 0.6% decline.
So far, the market has reacted positively to this news, perhaps due to the fact that the probability of economic failure has decreased. However, this positive reaction to the news may be short-lived, as it signals that the Federal Reserve has been given the green light to continue its aggressive policy measures and continue to raise rates.
This argument is supported by core PCE inflation of 4.5%, although lower than last month’s 4.7%, consistently high.
If the Federal Reserve sees these numbers as a sign that inflation is the biggest issue to deal with right now, resulting in continued hawkish policy, assets like crypto could react badly once short-term volatility is out of the way. This is because aggressive Federal Reserve policy removes liquidity from the market, causing highly liquid assets like crypto and stocks to sell off.
Although the macroeconomics is currently vulnerable to risk assets, many governments are trying to become the next global hub of crypto. The United Kingdom recently recognized Bitcoin and Ethereum as official regulated financial instruments. Also, Hong Kong is now trying to trick crypto companies with retail allowances by allowing the listing of Bitcoin and Ethereum trading platforms. I think government regulation could be a key catalyst for crypto adoption in the coming years.