In a dramatic turnaround, the Bitcoin (BTC) price has defied recent struggles and surged by a staggering 6.47% in the last 24 hours. This positive trend comes amid a shift in investor sentiment regarding potential monetary policy adjustments by the US Federal Reserve.

Why did the price of Bitcoin rise?

The catalyst for this rise seems to be a combination of many factors. The latest data from the US Labor Department showed that labor market conditions are strong. Unemployment claims held steady at 208,000 in the week ended April 27. This, combined with an increase in the Employment Cost Index, instilled confidence in investors and led to increased belief that the Fed could adopt a more dovish stance by the end of 2024. Bitcoin also rose by 6 percent after this development.

This shift in expectations is very important. Low interest rates make fixed-income investments less attractive, potentially driving capital into riskier assets such as cryptocurrencies. The data shows that market participants are increasingly betting on this scenario, with the probability of the Fed cutting interest rates below 5.00% by December 18 rising to 61%, a significant increase from 40% just a week ago.

Adjustment in M2 money supply

Adding fuel to the fire, the US M2 money supply, which covers cash, savings and short-term deposits, showed its first positive adjustment since November 2022. Historically, such increases have coincided with strong performances in the cryptocurrency market, potentially heralding a rally. This time around, there is a similar trend.

Moreover, Bitcoin’s market capitalization currently stands at a healthy $1.2 trillion. Of the nearly $6 trillion currently parked in money market funds, even a modest 1% allocation shift could mean a significant $60 billion in funding for the cryptocurrency market. The potential for wider institutional adoption is a positive sign for Bitcoin’s long-term prospects.

What about ETF inflows?

Data from Farside Investors highlights another bullish indicator: Total net inflows into US spot Bitcoin ETFs have reached a staggering $11.2 billion since their launch in January. This strong investor interest underscores the growing confidence in Bitcoin as a legitimate asset class. While the overall trend is positive, it is worth noting that Grayscale GBTC experienced a net outflow on May 2. This contrasts with broader market enthusiasm and can be attributed to the specific investment strategies employed by leading firms.

Beyond immediate economic factors, renewed investor interest in Bitcoin may also be driven by doubts about the sustainability of the tech sector’s growth. Apple’s recent announcement of a massive share buyback program devoid of product diversification or market expansion plans may encourage investors to explore alternative opportunities with high growth potential, such as Bitcoin.

Apart from the Bitcoin price, other cryptos also rose

The positive sentiment went beyond Bitcoin, with other major cryptocurrencies making notable gains. Ethereum (ETH) broke the $3,100 mark, while Solana (SOL), XRP, Cardano (ADA) and even meme coins like Dogecoin (DOGE) and Shiba Inu (SHIB) all saw significant gains.

Looking ahead, the recent resurgence of ETF inflows appears to be a key factor behind Bitcoin’s price surge. With continued positive economic data and a potential dovish turn from the Fed, the cryptocurrency market could be poised for a period of sustained growth. However, investors should exercise caution and conduct detailed research before making any investment decisions.

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