Bitcoin traders are getting bullish that a rally is neigh. Should they be?

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Hi. Eric here.

If the professional prognosticators are right, Bitcoin is cooking up a rally.

Their argument for why the top cryptocurrency is about to break out of its six-month funk pretty much follows the same recipe.

Take a splash of institutional buy-in, add a pinch of steadying macroeconomic conditions, marinate it with the expectations of new leadership at the Federal Reserve, season with some regulatory clarity, hold the whales’ sell-off, et voilà, you’ve got yourself a Bitcoin rally.

This week, those voices grew louder as Bitcoin rose almost 4%, within spitting distance of $80,000 — a level the top crypto hasn’t seen since before the US and Israel began their bombing campaign on Iran on February 28.

“The tape is not euphoric. It is stubborn,” Louis De Backer and two of his fellow analysts at MAREX said in a note to investors on Friday. “That matters because stubborn markets tend to break when they refuse to go down on bad news.”

The question is if traders should be bullish.

Let’s break it down.

The extension of the tentative ceasefire between Washington and Tehran this week has eased some of the worries on global markets. The S&P 500 and the Nasdaq are both up this week.

Yet, the Strait of Hormuz, the vital artery for a quarter of the world’s oil, remains effectively shut. This keeps energy prices elevated. Energy prices are a key metric for inflation. With higher inflation, it is less likely that central banks around the world will cut interest rates.

High interest rates are usually bad for the price of Bitcoin because it constrains the liquidity investors have to invest in risk-on assets.

This brings me to Kevin Warsh. US President Donald Trump has picked the American financier — who has a history of backing crypto projects — to lead the Federal Reserve once Jerome Powell’s term as chair is up in May.

This week, Warsh subjected himself to an intense two-hour grilling on Capitol Hill. The Senate confirmation hearing saw him reject the assumption that he’ll simply be Trump’s “sock puppet” at the Fed, saying he’ll maintain the central bank’s independence from political interference.

Even so, he’s highly expected to slash rates once in the role. That is, if he ends up being confirmed.

Polymarket punters don’t like his chances. They put the chances of him being confirmed by May 15 when Powell is set to step down at 25%, down from 92% in March. His chances of being confirmed by June 30 have dropped from 91% in early April to 72%.

Then we’ve got regulatory clarity.

On the one hand, the crypto industry has a lot to be bullish about. They’ve gotten the Genius Act, a landmark stablecoin bill, signed into law; regulators are spewing out pro-industry guidelines; and Trump continues to champion crypto-friendly policies.

On the other hand, the Clarity Act remains stuck in legislative limbo. The massive bill would provide clear rules of the road for the nascent industry. Yet, the window to get it confirmed in 2026 is rapidly closing.

Lawmakers have, despite several bullish overtures in the past few months, been unable to reach a decision on the bill. And with the midterm elections coming up, the time to get the bill approved is running out.

If the Democrats recapture the House this November, which polls suggest they will, it is likely that legislative work will grind to a halt until the 2028 presidential election.

That being said, big Bitcoin investors seem to have stopped unloading their assets after their October sell-off contributed to the market decline.

And institutions seem to have returned to their pre-market-drop buying. Since the beginning of March, investors have piled over $3.7 billion into Bitcoin exchange-traded funds, according to DefiLama.

This would likely drive Bitcoin’s price to above $80,000 “within days,” CF Benchmark argued on Friday.

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