2024 has kicked off all-time highs for Gold (XAUUSD), Nasdaq100, Bitcoin and other cryptocurrencies.
The different asset classes have previously experienced significant selling pressure, especially from November 2021 to December 2022, for example, Bitcoin traded at a low of circa US$ 15,480. Several factors were at play against the respective asset classes sell-off, chief among them being the record high interest rate environment globally.
These asset classes have since made a dramatic comeback.
It is important to note that these instruments experienced some of their previous record highs during a low-interest rate environment and partly due to the COVID-19 pandemic. Retail trading surged as traders sought alternative means of income, which included crypto trading, during lockdowns.
Source: https://my.exness.com/webtrading: Exness WebTerminal, 16 Apr 2024
When global central banks began signaling higher interest rates to combat record-high inflation in November 2021, Gold, Nasdaq100 began to sell off.
What became evident was Bitcoin’s and Gold’s inverse correlation with the US interest rate path and US dollar performance measured through the Dollar Index (DXY). The US Dollar took center stage as investors plowed capital into US-Treasury bonds as they sought a hedge against inflation while chasing higher-yielding bonds vs cryptocurrencies and gold which paid no yields.
DXY vs Bitcoin vs Gold vs Nasdaq100
Chart: Comparison Dollar Index (DXY) vs Bitcoin vs Gold vs Nasdaq100.
While this conundrum played out, global asset managers saw an opportunity to create an asset class that was safe for investors while tracking the price of cryptos, in particular the popular bitcoin. The idea of the Bitcoin Exchange Traded Fund (ETF) and approved by was conjured up which the US Securities and Exchange Commission (SEC) officially approved and announced in January 2024.
This saw a resurgence in the price of Bitcoin whose the recovery and uptrend began in earnest in January 2023. which in earnest began its uptrend in January 2023. ETFs much like the Contract For Difference (CFDs) offered by international multi-asset brokerage firm Exness offer investors and traders the opportunity to partake in the asset as their value and price is derived from the underlying asset.
While 2023 remained a high-interest rate environment, expectations began building on the possibility of US interest rates reaching their peak and what would soon follow would be interest rate cuts from the US Federal Reserve (US Fed). However, these expectations were dampened when the US Fed kept interest rates higher for longer against vs market expectations.
The Gglobal outlook for backdrop of 2024 is presenting a more favorable environment for Gold, Indices (such as Nasdaq100) and cryptocurrency trading in general. While interest rates are still high, inflation has started to cool down, although not at the accelerated pace that Global Ccentral Bbanks had anticipated.
The odds of interest rate cuts have been priced in for the Second half of 2024 according to the US FedWatch Tool. The US Fed Chair Jerome Powell, in various speeches and statements, testimonies has also signaled impending interest rate cuts in 2024 provided inflation keeps moving towards their preferred target rate of 2%.
Source: www.cmegroup.com, Apr 16 2024
Having already reached an all time high of circa $73,706 in the first quarter of 2024, and holding all else equal, bitcoin is poised to stage a possible surge. Thise view is supported with a few facts;, Block halving events happen every 4 years and the Bitcoin halving event is expected this April 2024 in the next few days on Friday 19th April 2024;, other cryptocurrencies such as the popular Ethereum are seeking SEC ETF approval;, other regulators approval of spot ETFs such as the recent Hong Kong regulators approval of the launch of both spot ETFs of bitcoin and ether.
More crucially, the outlook that the US interest rates path indicates likely cuts in the second half of 2024 thus interest rates moving lower could be favorable for Gold, Nasdaq 100, and cryptocurrency trading.
Though the interest rates may not be as low as those in 2020 – 2021, $80,000 bitcoin does seem plausible in 2024 including possible further record highs from Gold and Nasdaq 100.
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