Bitcoin Surges 3% as Strategy Boosts BTC Reserves, Inflation Eases

Bitcoin (BTC) experienced a significant surge of 3% on March 24, moving away from its low of $76,900 on March 11, despite failing to sustain the $88,000 level. This price movement has sparked curiosity among traders about the factors that could drive Bitcoin's daily close above $92,000, a level last seen on March 3. The frustration among cryptocurrency investors is compounded by the fact that gold is trading just 1% below its record high of $3,057, while Bitcoin is 19% away from its all-time high.

Analysts have attributed Bitcoin's recent price gains to various factors, including the US-listed company Strategy increasing its BTC reserves. Additionally, macroeconomic factors such as easing inflation expectations and a softer stance from the US President on tariffs have been highlighted as potential drivers. Despite this positive backdrop, traders are questioning what is preventing Bitcoin from maintaining its bullish momentum.

Economists are expecting signs of a slowdown in the "core" Personal Consumption Expenditures (PCE) index, which is projected to rise by 2.7% in February. This data, the US Federal Reserve's preferred inflation metric, is set to be released on March 26. If confirmed, the softer inflationary trend would support Federal Reserve Chair Powell's remarks on transitory inflation and increase the likelihood of two interest rate cuts in 2025, as reflected in the Treasury futures market.

As the US central bank shifts to a less restrictive monetary policy, risk markets typically benefit from increased liquidity and reduced fixed-income appeal. However, uncertainty remains regarding economic growth. Investors are increasingly worried about recession risks due to excessive valuations in artificial intelligence stocks and concerns that federal spending cuts could negatively impact consumers and the commercial real estate market. While these issues have little direct connection to Bitcoin, traders fear that all risk markets could suffer if the threat of stagflation emerges.

On March 24, Strategy announced the acquisition of an additional $584 million in Bitcoin, increasing its holdings to 506,137 BTC. The funds for this latest purchase came from the sale of 1.97 million common stock shares, along with the broader $21 billion STRK perpetual preferred stock issuance program. These expanded fundraising options have improved the company’s chances of reaching its ambitious $42 billion Bitcoin acquisition target. While this news appears positive for Bitcoin’s price in the short term, if the US Federal Reserve implements expansionist measures, corporate earnings will likely accelerate, making stocks relatively cheaper. Likewise, a reduced risk of a full-scale global tariff war benefits the stock market and lowers risks in the artificial intelligence and commercial real estate sectors.

Critics argue that Strategy has been the primary factor supporting Bitcoin’s $80,000 level, posing a risk of price corrections if the company fails to raise additional funds or pauses its stock issuance program for any reason. However, this view overlooks the fact that Bitcoin spot exchange-traded funds (ETFs) saw $786 million in net inflows between March 14 and March 21. In essence, Bitcoin is well-positioned to recapture the $92,000 level, although it remains heavily dependent on overall macroeconomic conditions. Regardless of gold’s performance, investors view Bitcoin as a risk-on asset, favoring a higher correlation with the stock market, at least in the short term.