(Kitco News) – Financial markets traded mixed on Wednesday morning, with Bitcoin (BTC) and gold seeing slight declines while stocks opened underwater but have since climbed higher. The early weakness in stocks was prompted by news that the DOJ is considering asking a judge to force Google to sell off key businesses to end its monopoly on the market.
Asset prices are also struggling due to a rising dollar, with the DXY resuming its uptrend to hit 102.875 in early trading.
DXY Chart by TradingView
“We suspect the market overreacted to the U.S. jobs data, which was tainted by the lowest ‘establishment’ response in over two decades, and seasonal adjustments were likely thrown off by Hurricane Helene and the 33k strike at Boeing,” said Marc Chandler, Chief Market Strategist at Bannockburn Global Forex. “We think Fed officials, and more speak today, have confirmed that it was not the game changer than many market participants think, which was likely influenced by positioning. It did help facilitate the dollar's upside correction we had been looking for. The greenback is firm today.”
“A final look at August wholesale inventories is unlikely to move anyone's needle, while the FOMC minutes due late in the session will provide color to what we already know: The median dot now sees another 50 bps of cuts in Q4 and 100 bp in 2025,” he added. “We suspect the market is more impressed with the jobs data than most Fed officials, and in part, this is because the market has strayed from the Fed's guidance.”
“Four Fed officials speak during today's session (Bostic, Logan, Goolsbee, and Jefferson), and after the markets close, two other officials speak (Collins and Daly),” Chandler noted. “The highlight of the week is tomorrow's September CPI. The headline rate is seen slowing to 2.3% from 2.5%, while the core looks sticky at 3.2%.”
Cryptocurrency prices continued to consolidate overnight, with some mild profit-taking seen on recent gainers, while Bitcoin (BTC) bulls worked to solidify support at $62,000.
“The cryptocurrency market has stabilized around the $2.17 trillion level where it was a week and a day ago,” said Alex Kuptsikevich, senior market analyst at FxPro. “The sentiment index has remained in the 49-50 (neutral) range for the fifth day, which contrasts with the near ‘extreme greed’ sentiment in the stock market. This wariness among crypto investors has often heralded stock market sell-offs. Still, this time, it could be due to sell-offs in China and expectations of new signals on the Fed’s monetary policy.”
“Bitcoin’s price has changed little over the past 24 hours, remaining at $62.4K, sandwiched between the 200-day moving average above and the 50-day below,” he added.
BTC/USD Chart by TradingView
“Potential triggers to break out of this range could be Fed minutes or US inflation data if they lead to a reassessment of expectations in traditional markets,” Kuptsikevich said. “A technical signal could be a move out of the range delineated by the mentioned moving averages at $63.6K and $60.8K, with the potential for further movement towards a breakout.”
For now, digital gold is playing second fiddle to its physical counterpart, as King Crypto remains too volatile for institutional investors to consider it a reliable store of value.
“The 45% year-to-date growth in Bitcoin’s price has not negated its extreme volatility risk,” said Maruf Yusupov, Co-founder of Deenar. “One factor that has disfavored it as a better alternative to gold as a hedge against inflation is exactly that. According to a recent Goldman Sachs analysis, Bitcoin has a volatility ratio of 2 compared to 3 for Gold. This metric measures the return that follows an investment per the associated risk. Notably, when given the same level of uncertainty, Bitcoin tends to experience more selloffs than gold.”
“This reality played out over the past month, with Bitcoin hovering from a low of $55,000 to a high of $66,000,” he noted. “Within the same period, gold hit multiple all-time highs, with the latest pushing the precious metal to $2,685.49. That Bitcoin price is hovering around $62,000 suggests a relatively mild growth trend, but the likely steep fall has made investors cautious.”
That said, BTC still has some redeeming qualities that make it attractive to investors, and long term, Yusupov thinks it could eventually challenge the market cap of gold.
“Discounting this volatility, Bitcoin has more technical attractiveness owing to its decentralization and scarcity. Also, the volatility is somewhat positive,” he said. “It might also play a role in pushing Bitcoin’s valuation in the long term to catch up with and possibly surpass gold’s market capitalization. With this, some investors generally see the potential long-term gains as a fair tradeoff for short-term volatility.”
According to Ki Young Ju, founder and CEO of CryptoQuant, the sideways price action comes as Bitcoin is roughly halfway through its bull cycle, and if history rhymes, the peak could come in April 2025.
#Bitcoin is in the middle of the bull cycle.
Its market cap is growing faster than its realized cap, a trend that typically lasts around two years.
If this pattern continues, the bull cycle might end by April 2025. pic.twitter.com/o4k8B1Rkhv— Ki Young Ju (@ki_young_ju) May 17, 2024
At the time of writing, Bitcoin trades at $61,804, a decrease of 1.44% on the 24-hour chart.
