The price of gold has reached a new all-time high, exceeding $2,700 per ounce, while the S&P 500 index has also climbed above 5,870 on Thursday. Meanwhile, bitcoin has surged by 15% from its October low and is poised to retest the $70,000 level.
Bitcoin’s Slow March to New Heights
Despite outperforming both gold and the S&P 500 this week, bitcoin remains about 8% below its record high set seven months ago. The cryptocurrency has been sluggish in recent times, with many attributing its lackluster performance to "too far, too fast" growth earlier in the year.
A Brief History of Bitcoin’s Price Action
In March, bitcoin reached an all-time high of over $73,700 before plummeting due to forced sell pressure from various sources. The German government’s decision to market its large stash of seized bitcoin and the Mt Gox trustee’s token return program added to the downward momentum.
The Volatility Factor
Bitcoin’s 24/7 trading schedule exposes it to more leverage and volatility compared to other assets, leading to liquidation cascades that can push prices below fair value. This phenomenon has contributed significantly to bitcoin’s price fluctuations in recent times.
Accumulation Signs Emerge
Contrary to the bearish sentiment surrounding bitcoin’s sluggish performance, data from Glassnode suggests that shrimps (those with less than one bitcoin) and whales (those holding between 1,000 and 10,000 tokens) have been accumulating the cryptocurrency over the past month. This accumulation trend is denoted by deep blue coloring in the Trend Accumulation Score by Cohort graph.
Outlook: All-Time Highs on the Horizon
The case for a new record seems clear, with further rate cuts from Western central banks on the horizon and the rise of pro-crypto GOP presidential candidate Donald Trump. Additionally, the pickup of flows into spot bitcoin ETPs indicates growing interest in the cryptocurrency.
Renewed Weakening Trend in Japanese Yen
One often-overlooked positive catalyst for a new record is the renewed weakening trend in the Japanese yen. Japan’s headline inflation rate fell to 2.5% year-over-year, marking its lowest reading since April and 0.5% softer than the previous month.
The Impact of Inflation on Interest Rates
The Bank of Japan might refrain from further rate hikes due to the declining inflation rates. This could lead to a decrease in the yen’s value against the US dollar, which peaked at around 140 in mid-September and has been weakening since.
Expert Insights
According to Bob Elliott, CIO at Unlimited Funds, "Japan has no inflation problem and little urgency to tighten." He noted that services inflation has fallen to roughly zero in recent months, while Japan’s GDP has been negative for 2024. This perspective highlights the potential for a prolonged weakening trend in the Japanese yen.
Comparing Bitcoin, Gold, and the Yen
In the past five years, bitcoin is up over 1,000% against the yen but far less against other major currencies such as the US dollar, euro, British pound, Canadian dollar, and Australian dollar. Similar action is observed in gold, which is higher by 150% versus the yen and just 80-90% against other major currencies.
Conclusion
The price of gold has reached a new all-time high, while bitcoin remains poised to retest its record high. The renewed weakening trend in the Japanese yen could be a positive catalyst for a new record, but it is essential to consider various factors influencing cryptocurrency prices.
Factors Contributing to Bitcoin’s Price Action
- Volatility: Bitcoin’s 24/7 trading schedule exposes it to more leverage and volatility compared to other assets.
- Forced Sell Pressure: The German government’s decision to market its large stash of seized bitcoin and the Mt Gox trustee’s token return program added to the downward momentum.
- Leverage: Bitcoin’s price fluctuations can be influenced by liquidation cascades, pushing prices below fair value.
Accumulation Signs
- Data from Glassnode suggests that shrimps (those with less than one bitcoin) and whales (those holding between 1,000 and 10,000 tokens) have been accumulating the cryptocurrency over the past month.
- This accumulation trend is denoted by deep blue coloring in the Trend Accumulation Score by Cohort graph.
Outlook
- Further rate cuts from Western central banks on the horizon
- The rise of pro-crypto GOP presidential candidate Donald Trump
- Pickup of flows into spot bitcoin ETPs indicates growing interest in the cryptocurrency
- Renewed weakening trend in the Japanese yen could be a positive catalyst for a new record
