(Kitco News) – Bitcoin (BTC) price held steady in early trading on Tuesday, while stocks experienced volatility after China announced it would implement a variety of stimulus measures – the largest since the COVID-19 pandemic – as the People’s Bank of China looks to support markets and revive its sluggish economy.
BTC/USD Chart by TradingView
With China now launching economic defensive measures after the U.S. Federal Reserve shocked markets with a 50 basis point cut, there is a growing cohort of analysts warning that economic conditions may be worse than governments are letting on, which has helped boost the safe-haven standing of gold.
The yellow metal hit a fresh record high above $2,640/oz overnight and looks poised to continue its ascent as global financial markets deteriorate in the face of rising geopolitical tensions and worsening economic conditions.
According to Luke Gromen, founder and president of macro research firm Forest For The Trees (FFTT), gold and Bitcoin are two assets that he “likes” right now, saying they are both “very well-positioned” to rally in an environment where the US government will likely need to inflate away its debt.
“I think gold and Bitcoin are both very well positioned when you’re in a regime where the most powerful nation in the world – the most indebted nation in the world, the reserve currency issuer of the world – cannot afford their debt unless real rates are negative over some sustained period of time over the cycle,” Gromen said during an interview with David Lin. “That’s a really good setup for gold, it’s a really good setup for Bitcoin, and I think it’s the reason gold prices in dollars have completely separated from inverted US real rates.”
“Ultimately, that’s a phenomenon we see all the time in emerging markets,” he added. “Rates go up and gold goes up in that currency. It’s been a long time since it’s happened in dollars, but it’s happened since 2022, and that’s the message of why gold is rising despite US real rates having risen is that the US government can’t afford positive real rates and so that will end.”
“So I think we’re in the early days of positive real rates in the US ending and that’s really good for gold, it’s really good for Bitcoin,” Gromen concluded.
Further support for Gromen’s outlook was found in The Kobeissi Letter, which tweeted that “Prediction markets are now pricing in a 59% chance of at least 3 MORE rate cuts in 2024.”
“In other words, markets now see a base case of at least 75 basis points in additional rate cuts this year, according to @Kalshi,” they said. “Meanwhile, the Fed's latest guidance was that an additional 50 basis points of cuts are expected.”
“Markets even see a 17% chance 100+ basis points of ADDITIONAL rate cuts this year,” they added. “Markets beginning to price-in a 4% chance of a 75 basis point rate cut at a SINGLE meeting. Interest rate futures are trading like we are in a crisis.”
“Markets see a material chance of two MORE 50 basis point rate cuts this year,” they said in a follow-up post. “Meanwhile, Powell just said that 50 basis point cuts will not be the norm. Markets don't believe the Fed.”
At the time of writing, the CME FedWatch Tool shows that Wall Street puts the odds of a t 50 bps rate cut in November at 57% and a 50% chance that interest rates will be lowered to a range of 4.00%-4.25% in December.
While economic conditions steadily decline and expectations for additional rate cuts rise, market analyst Rekt Capital highlighted that history shows its “Breakout time for Bitcoin.”
“Historically, Bitcoin has broken out from its ReAccumulation Range 154-161 days after the Halving,” Rekt Capital said.
“It is 157 days after the Halving now,” he noted. “History suggests it is ‘Breakout Time’ for Bitcoin.”
At the time of writing, Bitcoin trades at $63,197, a decrease of 0.30% on the 24-hour chart.
