Bitcoin’s (BTC) 17.5% rally between March 16 and March 22 surprised options traders betting on price levels below $26,000. The movement resulted from investors seeking protection against persistent inflation and the ongoing banking crisis.
Bitcoin bulls have been paying close attention to the negative effects of near-zero interest rates between April 2020 and April 2022, and some have used the information to profit from the $1.2 billion in BTC options that are set to expire on March 24.
Resilient inflation and improving housing markets
According to the official consumer price index (CPI) released on March 22nd, Inflation in England unexpectedly increased to 10.4% in February due to higher food prices. This outcome is likely to prompt the Bank of England to raise interest rates on March 23, thereby increasing the likelihood of a recession. A higher cost of capital is detrimental to businesses and families, but it is the only way to stem the rise in consumer prices.
Meanwhile, existing home sales in the United States increased 14.5% in February, following the first annual price decline in over a decade. The numbers released on March 21 reflect the decrease in mortgage rates resulting from the increased demand for government bonds. In addition, the increase in sales suggests that the housing market has reached a price floor.
Investors frantically sought protection against monetary debasement as governments were forced to inject capital to prevent banking sector contagion. For example, the yield on 5-year U.S. Treasuries decreased from 4.34% on March 8 to 3.6% on March 22, indicating increased demand for fixed-income instruments.
Is the new world one where the prices of all assets are rising?
Consumer prices continue to rise even as the S&P 500 reclaimed the 4,000 mark. Housing market demand is increasing, and gold gained 7.8% in 2023. Every asset with a chance to profit from inflation is increasing, a typical sign of fiat currency debasement.
The movement is not consistent with the macroeconomic scenario in which banks required emergency bailouts and major corporations were forced to lay off thousands of employees due to declining sales prospects. Therefore, a portion of Bitcoin’s recent gains toward $28,000 is due to the weakening U.S. dollar.
If the fear of a recession continues to have a negative impact on risk markets, Bitcoin may struggle to maintain the price levels necessary for bulls to earn $380 million or more by March 24 when weekly options…
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