(Kitco News) – Gold proved why it’s the preferred store of value on Friday as the yellow metal surged to a new record high above $2,500 as recession fears eased, while Wall Street’s certainty that an interest rate cut will come at the FOMC meeting in September has many front-running the expected boost expected for risk assets.
With the narrative of Bitcoin (BTC) as ‘digital gold’ continuing to rise in popularity, gold’s ascent may have aided BTC bulls in getting the price action back on track after the top crypto sank to a low of $56,125 overnight.
“Bitcoin took a nosedive on Thursday, plummeting below $56,100 in a swift and unexpected drop,” said analysts at Secure Digital Markets. “This was particularly surprising given that the equity markets were on the rise at the same time. After several days of calm, the market action suddenly kicked into high gear, pushing BTC down to its lowest point since the panic in early August.”
“We might see the downtrend continue toward $54,000, but a bounce-back is likely on the horizon,” they added. “The summer lull is fading, and with the U.S. elections just around the corner, we could see bullish momentum returning, especially in the crypto space.”
The predicted bounceback arrived on Friday afternoon, as Bitcoin used support at $58,000 as a springboard to jump back above $59,700, with bulls now setting their sights on resistance at $60,000.
BTC/USD Chart by TradingView
Stocks also managed to climb into the green in the afternoon after experiencing some choppiness in early trading as market watchers digested the latest economic data and determined that it was positive for asset prices.
“Thursday saw both the S&P 500 and Nasdaq notch their sixth straight day of gains, with the S&P up over 3% and Nasdaq over 5% for the week – on track for their biggest weekly gains since November,” Secure Digital Markets analysts noted. “Strong retail sales data and a drop in weekly jobless claims have eased recession fears, fueling optimism in the markets.”
The major indices saw a modest continuation of their upward trend on Friday, resulting in their best week of the year. At the market close, the S&P, Dow, and Nasdaq all finished higher, up 0.20%, 0.24%, and 0.21%, respectively.
At the time of writing, Bitcoin trades at $59,300, an increase of 4.2% on the 24-hour chart.
Forget rate cuts, it’s all about the money supply
While financial headlines and market watchers intensely focus on interest rates and the possibility of a cut, multiple analysts have said the M2 money supply is a better gauge of Bitcoin’s future performance as King Crypto closely tracks the growth of fiat.
“Right now, Global Money Supply (Global M2) is breaking upward to new all-time highs,” noted TradingView analyst CryptoCurb. “Global money supply breaking upward has historically led to all of crypto breaking upward.”
This observation was echoed by Jamie Coutts, chief crypto analyst at Real Vision, who also said developments with the M2 help explain the struggles Bitcoin has had in recent months.
“Over the past decade, #Bitcoin has had a tendency to trough several months before the bottom in global M2,” Coutts tweeted. “Then it rips, gets way ahead of the move in liquidity, and has a mid-cycle correction.”
“Now, momentum in global liquidity is starting to accelerate higher while all the froth from ETF launches and excess leverage has left the Bitcoin market,” he added. “The perfect setup.”
In a follow-up post, Coutts noted that “In a debt-based fractional reserve financial system, the money supply must continually expand to support the outstanding debt. Otherwise, everything will collapse. This is the natural state.”
On Thursday, JPMorgan Chief Global Economist Bruce Kasman wrote that “the probability of a U.S. and global recession starting before end-2024” is now at 35%, which increases the likelihood of interest rate cuts, which will lead to a rise in M2. He also noted that the probability of a recession by the end of 2025 now stands at 45%.
After highlighting several recent developments, including struggles in the labor market, Kansman said, “Taken together, these developments warrant a break from gradualism and we expect the Fed to make a level adjustment in its policy stance that lowers rates by at least 100 basis points through year-end.”
The second chart provided by Coutts shows that the last time the Fed cut interest rates was in March of 2020, which also marked the beginning of a rise in both M2 and Bitcoin’s price. With the dollar index (DXY) showing a pattern of declining when M2 rises, Coutts noted that Bitcoin “experiences the highest velocity upside move when the dollar breaks lower.”
US Dollar Cycles & #Bitcoin Bull mkts. The trend support line is arbitrary. The point is that $BTC experiences the highest velocity upside move when the dollar breaks lower. If the DXY is weakening from here it's being coordinated by the Fed and global liquidity is being… pic.twitter.com/A9ah7WYnxj
— Jamie Coutts CMT (@Jamie1Coutts) August 14, 2024
Altcoins rally to end the week
The bounceback for Bitcoin also provided a boost to the altcoin market, leading to most tokens in the top 200 recording gains to end the work week.
Daily cryptocurrency market performance. Source: Coin360
Altlayer led the field with an 18.9% rally, followed by a 12.6% gain for Helium (HNT), and an increase of 9.2% for Curve DAO Token (CRV). Popcat (POPCAT) was the biggest loser, falling 6.5%, while Celestia (TIA) lost 5.4%, and Book of Meme (BOME) declined by 4.8%.
The overall cryptocurrency market cap now stands at $2.09 trillion, and Bitcoin’s dominance rate is 56.3%.
