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Cryptocurrenciess had an August to forget. Coinciding with a broader retreat in crypto values, Bitcoin marked its worst decline last week since the chaos engulfed global markets in early August, and it's slide continues this week.
From above $64,250, Bitcoin crashed to $56,660 even as global stocks turned the corner to mark significant gains. Ethereum, the second-ranked token, also saw a steep decline.
Still, the top crypto token managed to stay above lows hit in early August's global market rout.
Major crypto tokens are shedding their gains after Federal Reserve Chair Jerome Powell gave the strongest signal to date that the central bank is planning to cut interest rates from a level not seen in over twenty years.
With the Fed effectively intervening in the market for various assets, the recent decline in Bitcoin's value below its 200-day moving average is concerning.
Despite a run of gains for the original cryptocurrency's exchange-traded funds in the US, Bitcoin has dived. Some market participants are worried that the US government is selling confiscated tokens.
The bitcoin price reached a new all-time high of $73,798 in March, marking a 42 per cent increase for the year.
Some question whether the rally still has legs after a lengthy stint below that level.
Bitcoin Trails Other Assets
Bitcoin lagged behind traditional assets at the end of August due to declining liquidity and ongoing concerns that governments may sell their cryptocurrency holdings.
Recent market sentiment has been pessimistic, with Bitcoin suffering losses for August and failing to maintain a price over $60,000.
At the same time, gold has reached new heights, and a worldwide stock index is returning to a record high.
To add to the ongoing argument on bets between gold and bitcoin, the market capitalisation of the yellow metal has jumped significantly.
Nearing $18 trillion is the estimated total market capitalisation of gold. To put that figure into context, gold's market capitilisation is nearly as large as the world's largest economy - the Unites States.
On August 5, a measure of the 100 most valuable digital assets had its worst decline since November 2022.
Stocks fell along with the retreat as investors worldwide were less willing to take risks due to worries about US growth and the unwinding of the yen carry trade.
However, global stocks have since recovered and are looking at new highs after the Fed's crucial pivot in the Jackson Hole symposium.
August will be remembered as an unusually optimistic late summer month, four weeks after a Wall Street mini-panic sent stocks tumbling in a frenzy subsequently deemed as an ill-advised tantrum by some.
Conviction levels are skyrocketing across all assets.
For the past four months running, for instance, exchange-traded funds that follow government debt, corporate credit, and stocks have all increased in tandem.
Since 2007, this has been the longest period of connected growth.
In the twelve months leading up to the first interest-rate decrease in an easing cycle, the S&P 500 has never soared to a level of 25%.
Is a gentle landing in the cards?
“Everything has to go right,” stated Lindsay Rosner, head of multi-sector investment at Goldman Sachs Asset Management.
Maintaining trend or above-trend economic growth is essential.
An ideal labour market temperature would be just right—not too hot, nor too cold.
This will boost investors to keep buying.
There must be an ideal harmony between all of those things, which is what broad market moves in August represent.
On the other hand, digital assets have struggled to keep up.
Arthur Hayes Interestingly Not Interested in Interest Rates
Never one to bite his tongue and go against the grain, Arthur Hayes believes that the Fed's movements might not affect the crypto industry as strongly as some believe.
In a post on X, the former BitMex CEO highlighted how Bitcoin's price has struggled since Powell's Jackson Hole speech and that repurchase agreements (RRPs) are paying 5.3% interest, which is higher than Treasury bill yields of 4.38%.
Consequently, large money market funds are rotating from Treasury bills to RRPs, leaving less money for risk-on assets like crypto. Hayes thereby believes that this contradicts the assumption that lower interest rates benefit high-risk assets.
My theory on why Fed rate cuts aren't going to plan.
— Arthur Hayes (@CryptoHayes) September 2, 2024
Since JAYPOW annc Sept rate cut at J-Hole, $BTC down 10%, y? I thot rate cuts were good for risk assets.
RRP pays 5.3% no T-bill under 1-yr maturity pays more. MMF will move money from T-bill -> RRP which is $ liq -ve.
Since…
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