A bit of a clickbait title, but it does represent my viewpoint. Next, I will explain my perspective solely from an economic standpoint, as ultimately, the price fluctuations depend on the inflow or outflow of market funds. I want to emphasize again, if you think that the price trend of Bitcoin with a trillion-dollar market cap is purely 'manipulated' by so-called big players, I suggest you close this article directly. I don't like to preach to the uninterested.
Recently, many people have mentioned that BlackRock's increase in Bitcoin holdings is the core driving force behind this round of price increase, and I have followed this line of thought to conduct careful research.
First of all, the recent two times when BlackRock publicly increased its holdings 'directly' were on March 22 and March 24, with average prices of $83,000 and $85,000 respectively on those days. This was before the tariff policy was implemented, specifically before the last dip to $74,500. Therefore, it can likely be understood as a routine partial increase at a mid-price level. After the increase, the direct holdings of Bitcoin are estimated to be around $50 billion. It's worth mentioning that many people believe BlackRock is a big player, but honestly, there's no need to think that way. First of all, BlackRock can be considered the largest asset management company in the world, managing trillions of dollars in assets, and Bitcoin is just a small part of its investment portfolio. You can believe they are optimistic about Bitcoin's long-term value, but it's nearly impossible for them to disrupt the entire market by reaping small profits from the current market (for BlackRock). Occasionally manipulating the market for a few thousand points is something that exchanges can do, but that's about the limit of what they can achieve. The safe funds they can use are just this.
Back to the main topic, aside from direct increases, there are also indirect increases, which are in fact the largest source of volatility in the past week: the net inflow of funds into BlackRock's IBIT Bitcoin spot ETF. Let’s first do some public education: first of all, this IBIT is a spot fund, and secondly, this fund accounts for 42% of the total market size of Bitcoin ETFs. Although it’s not more than half, you can think of it as a bellwether. Finally, this is a fund that can be delivered in real-time. In simple terms, if external funds have a demand for investing in Bitcoin, for reasons of legality and compliance, or due to operational requirements leading to concerns about direct holdings or various account securities, they can pay a very low management fee and transaction cost by purchasing the IBIT fund to gain Bitcoin spot investment returns. In short, BlackRock's indirect holding is essentially external funds using this channel to buy and hold.
So why has foreign capital recently used channels to indirectly enter the Bitcoin market? I checked, and indeed around $2-3 billion has flowed in over the past week. The largest single source on that day was from U.S. pension funds (which explains my earlier mention of legality and compliance, as there are currently no clear laws, so these funds cannot directly invest legally in Bitcoin) with about $100 million, due to concerns over the instability of the stock market influenced by recent tariffs, and the relatively low expected returns on new Treasury bonds. In plain language, U.S. stocks have recently been more volatile than Bitcoin, and there is optimism about rate cuts leading to lower Treasury yields. In fact, these two reasons are also the basis for other funds flowing into Bitcoin ETFs, and the core reason remains the judgment of a rate cut.
After all this buildup, what I really want to talk about is the rate cut. I will try to summarize the impact of rate cuts in a simple and understandable way. Firstly, what are the benefits of a rate cut? 1: Lower corporate financing costs, benefiting corporate investment and development. 2: The recovery of U.S. stocks resulting from point 1. 3: Job creation and increased tax revenue resulting from point 1. 4: A weaker dollar, which is beneficial for exports and thereby aids the development of the manufacturing industry. 5: Reduced interest payments on new Treasury bonds, easing fiscal pressure. Don’t these points sound familiar? That’s right, they are exactly what Trump has been shouting for and aiming for since his campaign. The tariff policy ultimately aims to achieve these goals, which is why he has been crazily calling for the Federal Reserve to cut rates to cooperate with him. Now that we’ve discussed the benefits, let’s talk about the drawbacks of a rate cut. 1: Further depreciation of the dollar. 2: While a weaker dollar is beneficial for exports, it complicates imports, raising costs for all products and increasing inflation. 3: Companies heavily reliant on imported parts and raw materials will face new operational difficulties due to rising costs, and tariffs similarly will cause U.S. stocks to drop. This is a necessary downturn that Trump must go through on his path to revival. 4: Rate cuts will make it difficult for financing during new bond issuances, resulting in decreased liquidity of the dollar. 5: A weaker dollar loses its hegemonic status.
First, understanding the above fundamentals is crucial for grasping why the Federal Reserve is currently in a real dilemma. At the beginning of the article, I mentioned that the core reason for market funds entering the Bitcoin market is the anticipation of a rate cut. In the middle of the article, I discussed the pros and cons of rate cuts, and finally, I will present my conclusion.
Personally, I think the probability of a rate cut is very low, at most maintaining the original plan, or there is a certain probability of delaying or reducing the rate cut. The reasons are as follows: Firstly, although a rate cut is favorable for the manufacturing industry, manufacturing currently only accounts for 12% of the U.S. GDP, which is quite small. Secondly, the approach of high inflation (sticky inflation is currently quite severe in my analysis), along with the declining attractiveness of U.S. Treasuries leading foreign capital to withdraw from the U.S. and the decline of dollar hegemony is a greater risk than the benefits of rate cuts. Of course, U.S. stocks, being the favored child of the U.S. financial market, are a short-term priority to save, which is why so many people are betting on a rate cut. However, with Trump’s tariff policies loosening and slowing, U.S. stocks have also had a brief recovery. Moreover, in the long run, nonsensical tariff policies cannot last, and with appropriate tariffs, the stock market can digest this part of the negative impact. Ultimately, Trump and Powell are both gambling; Trump is betting that Powell cannot withstand the pressure of a stock market crash and will increase or preemptively cut rates to stabilize the market, making it easier for him to continue with strong measures on tariff policies. On the other hand, Powell is also betting that Trump cannot withstand the capital opposition and inflation-induced backlash from a stock market crash, ultimately choosing to gradually end or at least alleviate the tariff drama. Clearly, I believe the latter will emerge as the winner, so I think those betting on an increase or early rate cut will ultimately be disappointed.
Certainly, Bitcoin's significant correction is due to reasons beyond just the rate cut issue, and other points should also be considered. For example, the recent liquidation of positions after options expiry for profit-taking, the market greed index reaching a dangerous area, continuous reduction in miner holdings, and other negative signals.
Of course, the above analysis is for reference only. I hope everyone can read my article with a critical mind, rather than using the results directly. My articles will never mention specific price points, as I cannot be responsible for your funds; whether you lose or gain is entirely your own responsibility.
