TL;DR
- Crypto markets and stocks on the decline due to caution from the Federal Reserve.
- Gold reaches new highs driven by central bank purchases and geopolitical risks.
- Bitcoin as “digital gold” attracts new demand; ETFs could reduce volatility.
In a context marked by the Federal Reserve’s caution towards interest rate cuts, crypto markets have experienced a downward trend, in line with other risk assets such as stocks.
This has been reflected in more cautious market sentiment, which has even become slightly more bullish on expectations of rate cuts by the end of the year, according to Federal Funds Futures.
In this economic panorama, gold has emerged as one of the most benefited assets, managing to reach valuation levels never seen before.
This significant increase in its price has been attributed to a series of fundamental factors that have converged in the market.
First of all, the growing purchasing activity by central banks around the world stands out, who have shown renewed interest in this precious metal as a safe and reliable store of value in times of economic uncertainty.
Furthermore, we cannot ignore the growing geopolitical risks that are influencing investor perception.
Tensions and conflicts in various regions of the world are generating a climate of instability that drives investors to seek refuge in assets considered traditionally safe, such as gold.
These geopolitical events, combined with concerns about reflation and the possible impact on price stability, have contributed significantly to the increase in demand and therefore the value of gold in global markets.
Gold’s appreciation amid more cautious outlooks on Fed rate cuts indicates a focus on inflation rather than Fed rate changes, as well as a widespread belief that certain inflation increases could materialize more problematically than anticipated.
Bitcoin’s growing acceptance as ‘digital gold’ could attract a new group of investors
This perception of Bitcoin as a gold-like haven of value could result in aggressive buying of price dips, even amid persistent volatility during the price discovery process.
Additionally, the availability of Bitcoin ETFs could help reduce volatility by providing broader access to capital.
The impact of these ETFs and the increased flow of institutional demand is reflected in the open interest of Bitcoin futures, which now exceeds that of any centralized exchange and represents more than a third of the total Bitcoin futures market.
This change in market structure, along with the upcoming Bitcoin halving and other positive catalysts, suggests a generally positive outlook for cryptocurrency markets in the second quarter of the year.
