Bitcoin around record highs as fiscal instability and ETF inflows fuel rally

Bitcoin extended gains to a record high of 126.1k yesterday, before easing back to 124k at the time of writing. Other major altcoins have also experienced strong rallies, with Ethereum and Solana gaining 13% over the past 7 days and BNB jumping 27%.   

The total cryptocurrency market capitalisation surpassed the September peak of $4.13 trillion to reach a record high of $4.32 trillion. 

Bitcoin has rallied 12% over the past week, driven by a combination of institutional conviction, diversification away from fiat currencies amid political instability and fiscal worries, as well as optimism about more Fed rate cuts. 

Political situations in three major economies support BTC 

Bitcoin, like Gold, is often viewed as a hedge against economic and political uncertainty. The US government remains shut down, with few signs of progress toward a funding deal. The USD is on track for its worst yearly performance since 1973. This supports store-of-value assets, such as cryptocurrency and gold. 

The US is not alone. In Japan over the weekend, Sanae Tackaichi won the LDP leadership election and is now widely expected to become the first female prime minister. Tackaichi is a fiscal dove and is expected to reintroduce huge fiscal spending and monetary stimulus, marking a significant shift in Japan’s political and fiscal direction. The yen has fallen sharply this week. 

France’s political crisis also reared its head again yesterday with the surprise resignation of the French PM, just 27 days after taking office. Successive PMS have failed to push through a Budget to cut spending and raise taxes to reduce France’s ballooning deficit. The EUR is under pressure. 

Growing fiscal concerns in some of the world’s largest economies are adding momentum to the “debasement trade”. Investors are pulling away from fiat and flocking to safe havens such as Gold, Silver, and Bitcoin. With no quick fixes expected, this narrative could continue to support BTC across the fourth quarter, historically the strongest quarter for BTC. 

Institutional demand soars 

Spot BTC ETFs saw $1 billion in net inflows yesterday, marking the first time this has occurred since July 11. The strong demand follows BTC ETFs recording $3.24 billion in inflows last week, the second-highest weekly inflows since the ETFs' launch.   

Cumulatively, spot ETFs have seen $61.5 billion in net inflows since their launch in January 2024, bringing assets under management to nearly $170 billion. 

Persistent demand for ETFs could help Bitcoin’s price extend its gains higher. 

BTC technical analysis 

Bitcoin broke out above its falling trendline, rising to a record high of 126.1k before easing back to current levels of 124k. A close above the previous record high of 124.6k would strengthen the case for a meaningful breakout and pave the way for a continuation higher. It's worth noting that the RSI is overbought, so a pause around this level or a pullback could be on the cards. 

With blue skies above, buyers will look to extend gains towards 132k (the 50% Fibonacci extension of the August fall) and beyond, to 138k (the 61.8% Fibonacci extension), before 150k, the psychological level comes into focus. 

A break back below 123/124k turns the near-term trend back to neutral. Sellers would need to break below the 107k-110k region to create a lower low and turn the chart bearish. 

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