TradFi Is Buying Bitcoin Again, But War, Inflation May Unravel The Rally

Bitcoin’s (BTC) consolidation continued into Thursday as bulls struggled to keep hold of $70,000, and competing narratives on BTC’s market structure versus its increasing institutional adoption clashed with the bearish overarching factors negatively impacting US equity markets. 

Citing Bernstein’s $150,000 by the end of 2026 price estimate, Bloomberg analysts said that data shows institutional investors returning to the Bitcoin markets in droves, reinforcing the view that BTC had “reached a floor.”   

In early March, a week-long stretch of inflows to the spot Bitcoin ETFs nearly topped $1 billion, while Strategy purchased 22,237 BTC for $1.6 billion through its new perpetual preferred equity, Stretch (STRC). In addition to the success of STRC, Strategy also unveiled plans to raise capital to buy $44.1 billion in additional Bitcoin. 

Further proof of institutions stepping back into the crypto market came from $10 trillion asset manager Morgan Stanley filing documents to launch its own spot Bitcoin ETF. Morgan Stanley recommends investors maintain a 2% to 4% allocation to cryptocurrencies, and on March 26, a proposed Labor Department rule, which would permit brokerages that manage and offer services in the $10 trillion 401(k) retirement plan market to invest in Bitcoin, progressed through the White House’s regulatory review process.  

On Thursday, Coinbase also launched token-backed down payments for Fannie Mae loans, essentially permitting Bitcoin holders to use BTC and USDC to fund home mortgages. The offering allows investors holding Bitcoin to unlock the trapped liquidity of BTC without selling or generating a taxable event. 

Related: US Bitcoin ETFs post 6-day inflow streak as crypto rallies

How important is Bitcoin’s $70,000 support?

While institutional investors’ renewed interest in buying Bitcoin has clearly returned, BTC’s price volatility and its inability to break out of a near 6-month price downtrend remain clear hurdles. The ongoing US-Israel and Iran war, along with President Trump’s threat to send ground troops to Iran continues to negatively impact stock markets and cryptocurrencies. 

On Thursday, in a Truth Social post, President Trump said Iran’s negotiators had “better get serious soon, before it is too late, because once that happens there is NO TURNING BACK, and it won’t be pretty!” The clear buildup of US military assets deployed to the Middle East has markets worried that a ground operation could begin as early as this weekend. 

Following a series of comments from the President, US markets sold off, with the DOW shedding 400 points, while the S&P 500 and Nasdaq saw 1.49% and 2.07% respective losses. On the other hand, WTI crude oil and Brent Crude rallied, with each seeing gains of over 4%.

With growing uncertainty on which direction the US-Israel and Iran war takes and the longer-term impact of record-high oil prices on US inflation and the wider economy, investors are electing to decrease their exposure to volatility. 

This explains Bitcoin’s frequent re-visits to prices below $70,000 along with the short-lived nature of rallies in the $71,000 to $76,000 range. That said, one positive is that institutional and retail investors appear to view $70,000 and below as an optimal buying zone, thus reinforcing the level as support.