(Kitco News) – Asset prices from stocks to gold and crypto fell into the red in early trading on Wednesday as investors reduced their exposure to the markets while reevaluating expectations for rate cuts in November and into 2025.
A rapid rise in bond yields and a spike in the DXY are adding to concerns as many have taken them as a sign to go risk-off in favor of easy returns, which is taking a toll on stocks and crypto.
“Equities have lost their upside momentum so far this week in moves which have seen both the Dow and the S&P 500 pull back from last week’s all-time highs,” said David Morrison, Senior Market Analyst at Trade Nation. “Traders have been spooked by the jump in bond yields over the past five weeks. The 10-year Treasury Note was yielding 3.6% in mid-September, just before the Fed cut rates by a thumping 50 basis points. This had risen to 4.248% as of this morning.”
“That’s a big move in a relatively short period and is a measure of the sharp recalibration carried out by investors as they reassessed the depth and speed of future monetary loosening from the Federal Reserve,” he added. “It suggests that investors expect the Fed to cut at a slower pace than previously thought, mainly because recession fears have been dialed back sharply.”
“Most indicators show an economy firing on all cylinders, with third quarter GDP forecast to come in over 3% year-on-year, a robust labor market and strong retail sales among the recent positive releases. This comes despite a Fed Funds rate with an upper limit of 5%,” he noted. “The VIX remains elevated, and should remain so until investors know for certain who the next President is going to be.”
Regarding the pullback in gold, Morrison reminded readers that bull markets for the yellow metal are long, and temporary pauses in its upward trajectory are to be expected.
“Gold has made a succession of record highs this year, and it has the potential to hit even more in the months and, possibly, years to come,” he said.
“Bull and bear markets stretch out over long periods of time where gold is concerned,” he added. “The foothills of the last major bull run can be seen in the first few years of this century. While it took a long time to get going, the bull market ran until September 2011, when gold topped out around $1,920. From there, it fell for the next four years, sometimes steadily, and sometimes sharply, until it leveled out around $1,050 in December 2015, having lost 45% of its value.”
“From here, it began to pick up. Although there were several false starts and sharp sell-offs (for instance, it finally broke above $2,000 in August 2020 but was back at $1,600 by October 2022), it never got back down to $1,000 again,” Morrison highlighted. “It was from here that the latest leg of the rally began, which accelerated from mid-February this year, taking prices to where they are now.”
“So, gold is either in ‘year nine’ of its rally if counting from December 2015, or ‘year two’ if counting from October 2022,” he concluded. “That’s a big difference. Either way, there’s room for it to run on for a while. But expect some significant pullbacks along the way.”
Turning to Bitcoin (BTC), data provided by TradingView shows that King Crypto slipped below support at $67,000 in the early hours on Wednesday and bounced off support at $66,000, a level that provided firm resistance during the bull rally in late September.
BTC/USD Chart by TradingView
“The crypto market is developing a correction at a moderate pace,” said Alex Kuptsikevich, senior market analyst at FxPro. “It has lost 1.3% more over the last day to $2.31 trillion, down around 3% from the recent peak. At the same time, the sentiment of greed persists. The corresponding index is in the 70-73 range for the eighth day.”
“Ethereum (ETH) continues to lose market share to Bitcoin and other altcoins,” he added. “As a result, BTC’s share of all cryptocurrency capitalization has risen to 57.3%, the highest since April 2021. But that doesn’t necessarily mean an upward trend for the top cryptocurrency, which has pulled back below $67K, losing 1% in the last day and nearly 4% from its peak on 21 October.”
“The price is now close to a local support level at $66.8K,” Kuptsikevich noted. “A break of this support will open the way for a deeper correction to $65.5K, near the 61.8% retracement level from the last rally and the late September top.”
While BTC is showing some weakness currently, CryptoQuant analyst MAC_D suggested it’s only temporary as the fundamentals of the Bitcoin network show strength.
“Recently, Bitcoin's hashrate has surged to an all-time high, indicating intensified mining competition and driving up mining difficulty to unprecedented levels,” he noted in an update. “The increase in hashrate and mining difficulty means that Bitcoin's intrinsic value is increasing, which means that for SmartMoney, Bitcoin is becoming an increasingly attractive investment.”
In addition, the number of active Bitcoin addresses (30D) has been surging since mid-September, and Bitcoin's total fees are also surging as on-chain transactions become more active,” he added. “Typically, when Bitcoin rallies, the number of active addresses and transactions on-chain spikes, and network fees tend to follow suit.”
“In conclusion, Bitcoin's network fundamentals are exhibiting patterns similar to those observed during previous bullish periods,” MAC_D said. “Even if a correction or consolidation phase occurs in the near future, there is a strong likelihood of a positive trend emerging.”
At the time of writing, Bitcoin trades at $66,230, a decrease of 1.39% on the 24-hour chart.
