- Attention is currently fully shifted to the possibility of a Federal Reserve interest rate cut, and the consequences are becoming apparent.
- Expectations of an interest rate cut could be a common ground bringing together Bitcoin and gold, but this is nearly where the comparison ends.
- The largest cryptocurrency has gained momentum since mid-October on hopes that soon the first spot Bitcoin exchange-traded fund (ETF) will be approved.
Bitcoin and Gold prices surged significantly on Monday, but investors should be cautious about the Federal Reserve!
Bitcoin and Gold Prices Rise on Monday
Attention is currently fully shifted to the possibility of a Federal Reserve interest rate cut, and the consequences are becoming apparent. Two assets seem to be particularly benefiting from this: Bitcoin and gold. On Monday, the cryptocurrency reached over $40,000 for the first time since May 2022 and last traded above $46,000.
Gold reached a new all-time high above $2,100 per ounce on Monday. Expectations of an interest rate cut could be a common ground bringing together Bitcoin and gold, but this is nearly where the comparison ends.
The new record levels for gold reflect the role of an interest rate cut in weakening the US dollar, while rising geopolitical uncertainties are another factor aiding gold as a traditional safe-haven asset. The reasons for Bitcoin, occasionally referred to as digital gold, are different.
The largest cryptocurrency has gained momentum since mid-October on hopes that soon the first spot Bitcoin exchange-traded fund (ETF) will be approved. Expectations of an interest rate cut enhance this momentum for Bitcoin, given its status as a risky asset rather than a safe haven. Lower interest rates tend to increase investors’ appetite for risky assets.
FED decision could change the game again
Investors are currently holding record levels of cash in the $5.7 trillion money market fund, according to the Investment Company Institute. This is a factor that helps with the desire to find room for assets like Bitcoin.
Between the two, the argument for Bitcoin to continue from here is probably easier than for gold to ultimately find a balance at new highs. For now, both can be supported by investors seeing a 59% probability of an interest rate cut by March, according to the CME’s FedWatch tool. However, continue to monitor these probabilities as the November jobs report on Friday and the Fed decision next week could change the game again.
