Bitcoin Left Out as Stocks, Bonds, and Gold Surge on Global Monetary Easing: What’s Next for Crypto?
The Federal Reserve is on the verge of initiating its first easing cycle since 2019, with speculation about whether the rate cut will be 25 or 50 basis points. This move comes as part of a broader global trend, with the European Central Bank, the Bank of England, and the Bank of Canada already reducing interest rates. Japan, although yet to join this easing spree, is only slightly above
Introduction:
As a global monetary easing campaign takes shape, traditional asset classes are enjoying a surge in value. Stocks, bonds, and gold are all hitting new highs, thanks to coordinated rate cuts from major Western central banks. However, Bitcoin, despite the positive macroeconomic environment, is notably absent from this rally. While the Federal Reserve and other central banks ease their policies, Bitcoin's performance remains lackluster compared to its peers. So, what's next for the world's leading cryptocurrency?
Global Monetary Easing and Traditional Markets:
The Federal Reserve is on the verge of initiating its first easing cycle since 2019, with speculation about whether the rate cut will be 25 or 50 basis points. This move comes as part of a broader global trend, with the European Central Bank, the Bank of England, and the Bank of Canada already reducing interest rates. Japan, although yet to join this easing spree, is only slightly above zero in its benchmark policy rate.
The impact on traditional markets has been substantial. The S&P 500 and Nasdaq are near record highs, U.S. Treasury yields have dropped to multi-year lows, and gold prices are soaring to all-time levels. This coordinated easing has clearly benefited stocks, bonds, and precious metals.
Bitcoin’s Struggle Amidst a Bullish Market:
Despite the bullish trend in traditional assets, Bitcoin has struggled to capitalize on the global easing. While it experienced a rally recently, its price remains below $60,000, approximately 20% lower than its all-time high of over $73,500 reached six months ago.
Bitcoin’s performance in 2024 has been positive, with a gain of over 40% year-to-date and a 127% increase from the previous year. However, its underperformance relative to its past highs and its lag compared to the S&P 500 and gold is notable. The cryptocurrency's price today is lower than its nearly three-year-old record of $69,000, making it less attractive as an inflation hedge when compared to gold and equities.
Historical Context and Future Prospects:
Historical data shows that Bitcoin has experienced only one significant rate-cutting cycle, which began in 2019. During this period, Bitcoin declined by about 15% from the first Fed rate cut in August to the end of November, when the Fed had cut rates by 75 basis points. It wasn’t until the massive monetary push during the COVID-19 pandemic that Bitcoin saw a substantial rebound.
This historical pattern suggests that Bitcoin may require more than modest rate cuts to initiate a new bull run. Larger, emergency-style central bank interventions could be necessary to spark significant price movements in the cryptocurrency.
Conclusion:
As traditional assets enjoy a global monetary easing-induced rally, Bitcoin's struggle to follow suit is evident. While it remains higher year-over-year and has shown resilience, its performance lags behind the gains of stocks, bonds, and gold. The cryptocurrency's future movements may hinge on more substantial monetary measures or a significant shift in market dynamics. For Bitcoin enthusiasts and investors, it may be a waiting game to see if larger central bank actions can ignite the next bull run.
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