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To start February, Bitcoin is currently trading 2.7 percent lower against the U.S. dollar than it did on January 1. Ethereum has followed in step, sliding 2.25 percent against the greenback.
Despite a hot rally throughout Q4 2023, the crypto market has slightly cooled following the long-awaited SEC approval of 11 Bitcoin spot ETFs operated by some of the world’s largest asset managers, including Blackrock and Invesco. After the funds were granted SEC approval on January 11, BTC plummeted to $39,520 per token (-14.8%) over 10 days before restabilizing at its current price point of about $43,000.
Market Snapshot: February 1, 2024
- Inflation Rate: 3.4%
- Fed Rate: 5.5%
- Gold Price: $2,055/oz.
- Silver Price: $23.04/oz.
- Bitcoin Price: $42,969/oz.
- Ethereum Price: $2,290/oz.
Despite the market’s correction, both Bitcoin and Ethereum remain on a bullish trajectory. BTC is trading +81.78% higher on the year, while Ether is up +40.43% over the same period. Both assets dwarf the S&P 500, which returned +18.47% year-over-year—an impressive yield that seems modest by comparison.
Both cryptocurrency and precious metals have seen renewed interest in recent months due to a confluence of factors: rebounding inflation, interest rate speculation, geopolitical tensions, a declining US dollar, and weakening bond yields.
Geopolitics and Interest Rates Take Center Stage
While a dovish Fed pivot on interest rates would likely send easy money flowing into crypto markets, the price of gold hangs in the balance of Middle Eastern geopolitics. With the prospect of a wider regional war involving Hezbollah, and disrupted trade flows in the Red Sea, both the logistical security of oil and demand for the U.S. dollar is in decline. Should conditions continue to deteriorate, we could see increased investor interest in gold as a safe-haven substitute for the dollar.
Regarding interest rates, rebounding inflation reports in January dashed any hope of a March rate cut. Jerome Powell and the Federal Open Market Committee (FOMC), however, have left all options on the table for their April 30 meeting, which, depending on inflation trends, could see the first of several rate cuts this year.
Bitcoin has historically performed its best in low interest rate environments. For instance, Bitcoin prices reached an all-time high of $69,000 per token in 2021, when interest rates were held at generational lows. East money is a bullish signal for cryptocurrencies, and we anticipate a strong and sustained rally if consecutive rate cuts materialize later this year.
Bullish Signals Loom for Alternative Assets
In 2024, both Bitcoin and precious metals have promising upside potential. Investors may want to get in now while prices are discounted ahead of any near-term bull runs.
For those looking to invest in gold or Bitcoin, consider investing in either asset through a tax-advantaged IRA to capitalize on the unique tax-deferral benefits inherent to these accounts. Our exclusive IRA reviews offer insights into top service providers in the industry, helping you navigate the options for integrating alternative assets like Bitcoin, gold, and silver into a self-directed IRA or retirement account. As always, consult with a qualified financial advisor before making any investment decision.
Liam Hunt, M.A., is a financial writer covering global markets, monetary policy, retirement savings, and millennial investing. His commentary and analysis have been featured in the New York Post, Reader's Digest, Fox Business, and Forbes.
