Across the world, since the lows of April, equity markets have risen robustly, delivering a historic bull rally. The broad market S&P 500 is up 6.58% year-to-date. But that looks feeble next to Bitcoin, which made new record highs yesterday, cresting over $122,000 per coin. Bitcoin is down over 2% this morning as speculators lock in their gains, but the cryptocurrency is still up over 25% year to date.
There are a bunch of reasons for this, of course, including the Trump Administration’s regulatory support for crypto. But the fundamental cause of Bitcoin’s rise is old-fashioned fiat cash coming in from the traditional finance sector, DB’s Marion Laboure and Camilla Siazon wrote in a note seen by Fortune.
The sums are staggering.
The steady influx of traditional money has reduced Bitcoin’s volatility—an asset that has on multiple occasions lost the majority of its value. “This sharp increase via ETF inflows has helped with Bitcoin’s liquidity and kept the crypto trading in a relatively tighter range compared to previous years,” Laboure and Siazon say.
There’s one other factor fuelling Bitcoin: The declining U.S. dollar. The dollar has lost nearly 10% of its value against foreign currencies this year on the DXY index. Investors are looking to store cash elsewhere. “With the US signing their tax bill into law this month, effectively locking in deficits of 6.5% -7% of GDP for the next few years, we have started witnessing a de-dollarisation trend (the dollar index is down almost -10% YTD) pushing investors toward alternative assets like gold and Bitcoin,” the note says.
Here’s a snapshot of the action prior to the opening bell in New York:
