On Monday, gold reached an all-time high, and bitcoin reached its best price in over two years as frantic investors’ anticipation that interest rates would drop in the upcoming year rippled through assets worldwide.
On Monday, the price of cryptocurrencies surged to above $42,000, partly due to hopes that the industry’s harshest penalties had been lifted. Afterward, it dropped back to $41,662, up 7.4% from the day before.
According to LSEG data, gold rose as much as 3% to $2,135 per troy ounce on Monday, setting a new record, before falling to $2,025 per troy ounce.
The actions come after a recent rush into bonds and stocks, spurred by rising hopes that the Federal Reserve will soon lower borrowing prices, even though head Jay Powell said on Friday that it was “premature” to declare the central bank’s war on inflation won.
“There is a striking similarity in the evolution of bitcoin and gold,” stated Pictet Asset Management Chief Strategist Luca Paolini. “Every asset class that benefits from the Fed’s aggressive rate cuts is doing well.”
Following a dramatic decrease in the cost of borrowing for governments and corporations, traders are already placing bets that the first-rate reduction might occur as soon as March. This comes after the US bond markets saw their largest monthly rise in nearly four decades in November.
Investors now find alternative assets comparatively more appealing due to lower rates on extremely safe US Treasury securities. The S&P 500 index was down 0.6% at the halfway point of Monday’s trading, but it ended the week at its highest point since March 2022. Even while inflation has decreased, recent US economic data has remained strong, which has increased demand for riskier assets like equities.
According to Max Kettner, chief multi-asset strategist at HSBC, “virtually all asset classes” are seeing an “everyone-is-happy-Goldilocks rally” in the markets.
Traders stated that increased investor interest following the resolution of two of the most prominent criminal cases that had shadowed the market for the previous year was another factor driving the impetus to purchase bitcoin, whose value has increased by more than a fifth in the last month.
The US successfully prosecuted Binance, the largest cryptocurrency exchange in the world, and Sam Bankman-Fried, the former CEO of FTX, last month. After entering a guilty plea to criminal charges pertaining to money laundering and financial sanctions breaches, Bankman-Fried was found guilty of fraud. Binance was ordered to pay $4.3 billion in penalties.
In spite of the concerns of numerous traders, US authorities chose not to shut down Binance. The Securities and Exchange Commission is still pursuing a separate action against Binance for allegedly breaking securities laws.”A lot of institutional investors were saying that they needed closure on FTX and clarity on Binance before they looked at the space again,” said Henri Arslanian, co-founder of Nine Blocks Management, a Dubai-based crypto hedge fund manager.
Monday saw an 8.3% increase in Ethereum, the second-most traded cryptocurrency, to $2,260, the highest level since May of last year.
Additionally, investors are hoping that in the upcoming weeks, the SEC will approve a bitcoin exchange-traded fund. For ten years, the SEC has declined to authorize spot bitcoin ETFs, or stock market funds that make direct cryptocurrency investments.
Along with businesses like VanEck and WisdomTree, several of Wall Street’s biggest investors—such as BlackRock and Franklin Templeton—have filed SEC reports. Spot bitcoin exchange-traded funds (ETFs) have long been seen by the market as a means of transferring ownership of digital assets from scandal-plagued cryptocurrency firms to established companies like BlackRock.
According to eToro market analyst Simon Peters, “ETF speculation is going to continue to drive behavior in the crypto market this week as investors buy into the narrative of the transformative impact opening the market to institutional investors will have on the ecosystem.”
Pressure to establish a bitcoin spot ETF is mounting even as the SEC launches a year-long crackdown on cryptocurrencies, including regulatory measures against entities like US-listed exchange Coinbase.
This year, the cryptocurrency asset management Grayscale won a landmark court case when a federal appeals court determined that the SEC erred in refusing its request to turn its flagship Grayscale Bitcoin Trust into an exchange-traded fund (ETF).
Conclusion
On Monday, gold reached a record high, and Bitcoin hit a two-year peak as investors anticipated a potential drop in interest rates. Cryptocurrency prices surged, with Bitcoin exceeding $42,000, driven by hopes of eased borrowing costs. The parallel rise in gold and Bitcoin reflects the impact of Federal Reserve rate cut expectations. The market, experiencing an “everyone-is-happy-Goldilocks rally,” also responded to the resolution of major crypto-related criminal cases. Ethereum saw an 8.3% increase. Speculation around SEC approval for a bitcoin ETF and optimism for institutional investment continues to shape market behavior despite regulatory scrutiny. The week unfolds with ongoing anticipation and speculation.