Bitwise: Expectations of US Bitcoin Strategic Reserves Drive Crypto Market Rise

Cryptocurrencies took center stage this week, outperforming traditional assets. The Bitwise Europe report attributes the rise to growing optimism about U.S. policy initiatives and ongoing Bitcoin supply tightening. At the heart of the report is the discussion about the potential creation of a strategic Bitcoin reserve in the U.S. Pennsylvania has already enacted legislation to support such a reserve, sparking speculation that other states may soon follow suit. Such expectations were amplified by betting activity on Polymarket, with the predicted probability of establishing a national Bitcoin reserve surging to over 50% last week. The report also delves into Bitcoin’s supply constraints, which come amid growing demand from ETFs and businesses. Inflows into U.S. spot Bitcoin ETFs surged, outpacing Bitcoin’s overall supply growth, creating a supply-demand imbalance. This shortage is reflected in Bitcoin’s liquidity and high liquidity supply indexes, both of which fell to all-time lows. Corporates are increasingly accepting Bitcoin as a reserve asset, with companies like Microstrategy buying large amounts of Bitcoin, reinforcing the trend. The researchers further explain that Bitcoin isn’t the only cryptocurrency to benefit from a more transparent regulatory environment in the U.S. Altcoins including XRP and meme coins like DOGE have also made gains. The Department of Government Efficiency has taken a crypto-friendly stance, adding momentum to these assets (particularly for DOGE). Ethereum, however, has not kept pace. This lag may be related to capital flows favoring other cryptocurrencies. On the broader economic front, the US CPI data for October was in line with forecasts. Combined with other indicators, this reinforces expectations of a possible Fed rate cut in December, bringing another variable to the evolving crypto narrative. (Bitcoin.com)