{"id":77522,"date":"2025-05-05T09:08:00","date_gmt":"2025-05-05T09:08:00","guid":{"rendered":"https:\/\/deutschedastg.wpengine.com\/?p=77522"},"modified":"2025-05-05T09:08:02","modified_gmt":"2025-05-05T09:08:02","slug":"macro-turmoil-a-bitcoin-macro-update","status":"publish","type":"post","link":"https:\/\/deutschedigitalassets.com\/de\/insights\/news\/macro-turmoil-a-bitcoin-macro-update\/","title":{"rendered":"Macro Turmoil \u2013 A Bitcoin Macro Update\u00a0"},"content":{"rendered":"
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Macro Turmoil \u2013 A Bitcoin Macro Update <\/p>\n\n\n\n

Von Dominik Poiger, Leiter des Produktmanagements, DDA<\/p>\n\n\n\n

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Let\u2019s make it quick as we all know what happened: The Trump administration slapped a blanket of tariffs on imports from various countries. And naturally, other countries (i.e. China) reacted with countermeasures on US good imported to their countries. <\/p>\n\n\n\n

This sent markets sharply south with global fears of a global trade war breaking out. <\/p>\n\n\n\n

While crypto assets surprisingly held up steadily on Thursday, 3 April 2025 and Friday, 4 April 2025, contagion started when Asian equities sold off sharply on Sunday night\/Monday morning (7 April 2025). Until that point, the price of Bitcoin was mainly influenced by the third macroeconomic factor linked to the dollar. <\/p>\n\n\n\n

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Which macro factors explain the price returns of bitcoin? <\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/h4>\n\n\n\n

Which macro variables have recently been influencing the price of Bitcoin is a topic of continuing discussion in the cryptoasset community. Some contend that Bitcoin is just another “risk-on” trade like any other and that its value has a strong correlation with equity prices. There is some truth to that, as Bitcoin is currently still one of the most volatile financial instruments. <\/p>\n\n\n\n

In fact, similar to the S&P 500, Bitcoin sold off during the Covid-shock in February\/March 2020, recovered similarly, and has been trading downwards in a similar fashion since the beginning of 2025.  <\/p>\n\n\n\n\n\n

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Source: DDA, Bloomberg, as of 31 March 2025, past performance is no guarantee of future returns <\/p>\n\n\n\n

The “money printer” argument is also used by many experts to claim that monetary policy has been the only game in town for Bitcoin. In fact, it seems that in 2022, both Bitcoin and the real interest yield on US Treasuries have been strongly correlated. <\/p>\n\n\n\n

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Source: DDA, Bloomberg, as of 31 March 2025, past performance is no guarantee of future returns <\/p>\n\n\n\n

To find factors that influence the price of bitcoin the most, we employ a so-called principal component analysis (or \u201cPCA\u201d). This PCA breaks down the complexity of financial markets to only a handful of common factors that can account for the bulk of price movements. <\/p>\n\n\n\n

While analyzing a large set of financial data and performing a PCA on them, it can be shown that the bitcoin price is primarily moved by four factors plus residuals: <\/p>\n\n\n\n

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  1. Global Growth (PC1) <\/li>\n\n\n\n
  2. Monetary Policy (PC2) <\/li>\n\n\n\n
  3. US Dollar (PC3) <\/li>\n\n\n\n
  4. Eurozone risk (PC4) <\/li>\n<\/ol>\n\n\n\n
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    1. Residuals <\/li>\n<\/ol>\n\n\n\n

      It is crucial to understand that correlations are dynamic, i.e., they vary over time, rather than static. To capitalize on this idea of time-varying correlations among variables, researchers frequently use the word “regimes.” <\/p>\n\n\n\n

      Correlations over different time periods change and bitcoin is no different: Bitcoin occasionally “behaves” more like a Tech stock (rallying with increasing risk appetite) and occasionally more like a safe-haven asset like Gold (rallies with falling risk appetite).  <\/p>\n\n\n\n

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      Source: DDA, Bloomberg, as of 31 March 2025, past performance is no guarantee of future returns <\/p>\n\n\n\n

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