(Kitco News) – April saw a mixed start for financial markets as both cryptos and stocks fell under pressure to begin the new quarter while gold rallied to a new record high.
The volatility follows Friday’s release of the Personal Consumption Expenditures (PCE) price index – the Federal Reserve’s preferred inflation gauge – which showed core PCE rose 0.3% month over month, a deceleration from January’s 0.4% increase. The year-over-year increase came in at 2.5%, up slightly from the 2.4% year-over-year gain in January, leaving analysts mixed on what it means for interest rate cuts.
After the data was released on Friday, Fed Chair Jerome Powell said it was "along the lines" of what the Fed is looking for, noting that inflation is still on a “bumpy path” to their goal of 2%.
"It's not as low as most of the good readings we got in the second half of last year, but it's definitely more along the lines of what we want to see," Powell said. "The question then is, are those just bumps or are they something more than bumps? Is progress on inflation going to slow for more than two months? We expect inflation to come down on a sometimes bumpy path to 2%. But if that doesn't happen, then obviously our rate policy will be different.”
Monday’s price movements suggest that investors remain hesitant to increase their exposure to the markets amid sticky inflation that has started to rise higher in recent months, increasing concerns for some that interest rates will remain elevated even longer than anticipated.
At the closing bell, the S&P and Dow finished in the red, down 0.20% and 0.60%, respectively, while the Nasdaq gained 0.11%.
Data provided by TradingView shows that Bitcoin (BTC) fell under pressure from the daily candle open on Monday, sliding from $71,315 to a low of $68,065 in the afternoon before dip buyers arrived to mid it back above $69,000.
BTC/USD Chart by TradingView
At the time of writing, Bitcoin trades at $69,685, a decline of 1.63% on the 24-hour chart.
Taking the long view
According to Matt Hougan, Chief Investment Officer at BitWise, in times like these, when Bitcoin is experiencing heightened volatility and sideways trading, it’s important to keep the long-term picture in mind.
“Lately the crypto markets have been volatile, with Bitcoin bouncing between $60,000 and $70,000. The media gets breathlessly worried about every pullback and outrageously excited about every run-up,” Hougan said in his latest memo to investors. “My advice? Keep calm and take the long view.”
“Bitcoin is in a short-term holding pattern,” he said. “We are waiting for the Bitcoin halving, which will arrive around April 20; waiting for Bitcoin ETFs to be approved on national account platforms like Morgan Stanley or Wells Fargo, which could occur within the coming weeks; and waiting for various investment committees and consultants to schedule meetings, convene experts, and complete their formal due diligence efforts on Bitcoin.”
Hougan said that as these events unfold, Bitcoin is likely to continue to consolidate below its all-time high. “As we wait, Bitcoin seems likely to chop sideways on small changes in sentiment," he said. "But long term, we believe Bitcoin is in a raging bull market. Not only is it up nearly 300% in the past 15 months, but there are strong reasons to think that will continue.”
“The January launch of spot Bitcoin ETFs opened up the crypto market to investment professionals in a major way for the first time ever,” Hougan said. “And while there are countless forces that will shape Bitcoin prices in the days and months ahead, there’s one reality that I keep coming back to. These investors control tens of trillions of dollars – globally, the best estimate is over $100 trillion – and they are just starting to move into crypto.”
“This is a process that will take years, not months,” he stressed. “Think about the implications.”
“We are all excited about the $12 billion that has flowed into ETFs since January. And it is exciting: Collectively, the most successful ETF launch of all time,” Hougan said. “But imagine global wealth managers allocate just 1% of their portfolios to Bitcoin on average. It’s not crazy: While past performance is no guarantee of future results, a 2.5% allocation to Bitcoin has enhanced a traditional 60/40 portfolio’s risk-adjusted returns in every three-year period in Bitcoin’s history.”
“A 1% allocation across the board would mean ~$1 trillion of inflows into the space,” he said. “Against this, $12 billion is barely a down payment. 1% down, 99% to go.”
Downturn hits altcoins hard
The vast majority of altcoins in the top 200 traded in the red on Monday as the crypto market underwent a broad sell-off.
Daily cryptocurrency market performance. Source: Coin360
Core (CORE) was the notable standout, increasing 70.5% to trade at $3.51, followed by gains of 12.6% and 12.3% for Jito (JTO) and Book of Meme (BOME), respectively. Theta Fuel (TFUEL) was the biggest loser, falling 27.7%, while Ondo (ONDO) lost 16.3%, and ether.fi (ETHFI) declined by 15.5%.
The overall cryptocurrency market cap now stands at $2.62 trillion, and Bitcoin’s dominance rate is 52.4%.
