Will Bitcoin outperform?

7 Ekim 2024

Will Bitcoin outperform after breaking the resistance at $62,000 amidst recent economic and geopolitical events?

Today’s market analysis on behalf of Samer Hasn, Senior Market Analyst at XS.com

Bitcoin has experienced a strong upward push, trading near $63,473, following the release of a robust U.S. jobs report that showed the American economy added 254,000 jobs in September, significantly exceeding expectations. This data supported risk appetite among investors, which, in my opinion, drove Bitcoin’s price above $62,000. With expectations of interest rate cuts from the Federal Reserve declining, attention turned towards risk assets like cryptocurrencies, further boosting Bitcoin’s bullish trend. However, I believe that the impact of broader economic factors will continue to shape investors’ expectations regarding the future of U.S. monetary policy and its role in supporting Bitcoin prices.

Additionally, the slowdown in Ethereum presents a challenge to the overall bullish scenario for cryptocurrencies. At the same time, many other digital currencies declined in what is traditionally a bullish month for Bitcoin prices, reflecting increasing caution among market traders, especially with the recent drop in Bitcoin’s price after reaching its recent highs. Nevertheless, I can say that this pullback could be a potential opportunity for recovery shortly, driven by the historical optimism associated with October.

From my perspective, October often presents the ideal market conditions for Bitcoin. Particularly because this month, China began injecting $284 billion in stimulus spending into its economy, indicating strong support for market growth. Additionally, the Federal Reserve cut the benchmark interest rate by 0.5%, with inflation retreating to normal levels. These events coincided with the U.S. economy growing at an annual rate of 3% in the second quarter, raising expectations for further interest rate cuts by the Fed next year.

However, despite these positive conditions, Bitcoin’s value has declined by 4.3% since China announced its quantitative easing measures on September 25, and the cryptocurrency has only risen by 1.9% following the Federal Reserve’s interest rate cut. Here, many have questioned: “What’s happening? Isn’t Bitcoin supposed to reach $100,000?”

From my perspective, these figures indicate that something is missing, and the market is not responding as expected. One reason might be the escalating geopolitical tensions and the intensification of hostilities in the Middle East. Instead of capitalizing on these circumstances, it seems that investors prefer traditional safe havens, like gold, which has gained 29% this year.

Gold outperforms Bitcoin ETFs and U.S. stocks. However, geopolitical disruptions should also positively impact Bitcoin, right? This was highlighted in a BlackRock report that praised Bitcoin as a “unique diversifier” against financial and geopolitical risks, a “haven” for value preservation.

Yet, I believe this notion of Bitcoin as “digital gold” is no longer entirely accurate. Instead of acting as an independent asset, Bitcoin has moved in parallel with the Federal Reserve’s monetary policies, showing that it is premature to classify it as a strong haven.

Nevertheless, the outlook for Bitcoin has become more optimistic. It’s not just the Federal Reserve and China; some regulatory changes suggest that cryptocurrencies may receive relief from the campaign led by Gary Gensler, chair of the U.S. Securities and Exchange Commission.

If Donald Trump or Kamala Harris were to win the elections, both might adopt a less stringent approach toward this asset class. I expect this would encourage investors to return to the cryptocurrency market, especially with an increased focus on its mass adoption.

In my opinion, despite current challenges, there remains significant room for optimism regarding Bitcoin. While investors do not always require logical justifications or fundamentals to buy or sell, paying attention to geopolitical events and changes in monetary policy can have a substantial impact on market behaviour in the medium to long term.

I also believe that Bitcoin’s state in October 2024 will remain a mix of optimism and caution. Current conditions may be ideal for cryptocurrency growth, but ongoing events complicate the overall picture, especially amid fears of regional crises and political tensions. The question remains: Will Bitcoin succeed in proving itself as a haven amid these storms, or will it remain captive to sudden volatility? We’ll have to wait and see!

 

Zaid Barem / YMM