Bitcoin's Road to $100K: Could ETF Approval Unleash Crypto Frenzy?
Bitcoin's Road to $100K: Could ETF Approval Unleash Crypto Frenzy?
Digital Asset Market: The dovish stance of Federal Reserve governor, Chris Waller, has pushed the price of Bitcoin above $38K. Waller, who is typically seen as a hawkish member, stated that if the economy continues to slow down and inflation remains mild, rate cuts could be included in the Fed's agenda. This news, coupled with recent data indicating a moderation in economic activity and inflation, has contributed to the upward momentum of Bitcoin. Waller is ranked as the third-most hawkish member of the FOMC, making his statements even more significant for investors.
Standard Chartered Bank has reaffirmed its forecast that bitcoin will reach $100,000 by the end of 2024. It cites an earlier-than-expected approval of spot bitcoin exchange-traded funds (ETFs) in the U.S. as a potential catalyst. The bank also noted that the next Bitcoin halving, expected in April 2024, could contribute to an increase in bitcoin's price. Standard Chartered first made this prediction in April, stating that bitcoin's status as a safe haven asset has contributed to its current dominance in the cryptocurrency market.
Macro Economics: In the US, consumer confidence showed a slight improvement in November, with expectations about inflation improving, but perceptions of the present situation declining. Despite concerns about rising prices and other economic issues, consumers continue to spend money, with a significant increase in holiday spending over Thanksgiving. This supports the Federal Reserve's decision to keep rates unchanged at their next meeting. Additionally, home prices in the US have continued to rise, driven by low inventory. While the majority of consumers still perceive a recession to be likely in the next year, economists forecast slow but steady growth, which is further supported by recent data. All in all, the data suggests a current period of slower growth, with potential for growth in the next year.
Equities: It is mostly an uneventful week so far in the Equities market. QuantumScape, a Silicon Valley startup, is challenging Tesla's dominance in the rapidly evolving electric vehicle (EV) market with its cutting-edge solid-state batteries. These batteries have triple the energy density of Tesla's lithium-ion cells, faster charging times, and a safer, more sustainable design. With a surge in revenue and strategic partnerships, QuantumScape's technology is well-positioned to revolutionize the EV industry. The competition between QuantumScape and Tesla will shape the future of electric mobility and renewable energy. Investing in companies like QuantumScape is not only a financial decision, but also a vote of confidence in a sustainable future and a cleaner, more efficient mode of transportation.
The Fed and US Treasury: Two Federal Reserve governors, Michelle Bowman and Christopher Waller, have different views on raising interest rates to bring down inflation. Bowman believes rates should be increased to meet the 2% target in a timely manner, while Waller is confident that the current rates are sufficient. The Fed's Federal Open Market Committee has kept rates unchanged at a 22-year high, but may consider one more hike in December. Bowman thinks inflation may not be falling enough and blames government policies. Meanwhile, Waller sees recent data indicating a cooling economy and gradual decrease in inflation, but it's too early to determine if this will continue. However, October's Retail Sales and Consumer Price Index for October showing flat prices, has Waller hopeful for progress. In short, another Fed Hike would be unprecedented
Geopolitical: The war in Ukraine between Russia and Ukraine is not getting much attention in the media, but it is not because the situation is improving. In fact, the war seems to be tilting in favor of Russian President Vladimir Putin. Ukraine's much-touted 2023 offensive failed to make significant breakthroughs, and American and European military aid arrived too late to help. Russia has been able to build strong defenses and has a significant advantage in terms of resources and military spending.
The US House of Representatives, now controlled by isolationist Republicans, has refused to provide additional aid to Ukraine, and some weapons designated for Ukraine are now going to Israel. However, continued US support for Ukraine is crucial, not only for the country's well-being but also to contain and weaken Russia's military and political power. Failure to support Ukraine could also have implications for other global conflicts, such as China's plans to invade Taiwan. Despite some successes in defending their country, Ukraine has not been able to turn the tide of the war, and some previous assumptions about Western aid and Russia's military prowess have been proven wrong.
View from our desk
The cryptocurrency market is poised for a significant boost, potentially receiving a much-anticipated festive gift in the form of an exchange-traded fund (ETF) approval. Such a development is expected to elevate the value of Bitcoin and other digital currencies substantially. Reinforcing this optimistic outlook, Standard Chartered recently reaffirmed their prediction that Bitcoin could soar to a value of $100,000 by the end of 2024, an increasingly plausible scenario. Although the market experienced a lull last week due to the Thanksgiving holiday, it's anticipated that trading activity will pick up this week, with a particular focus on stablecoins.
On the monetary policy front, despite recent suggestions from the Federal Reserve about the possibility of another rate hike, it seems highly unlikely and unprecedented for the Fed to initiate a single rate hike after such an extended period of inactivity. This cautious approach by the Fed is understandable, given the complexities of the current economic landscape. However, bond yields might experience upward pressure due to elevated nominal GDP figures, as inflation continues to demonstrate a stubborn persistence. This economic backdrop presents a complex scenario for investors and policymakers alike.
In the housing market, an interesting development has been observed with a recent decline in mortgage rates. This drop could have various implications for the broader economy, potentially stimulating the housing market. However, it also reflects the intricate balance the Fed must maintain in its policy decisions, considering the impact on different sectors of the economy. As we navigate through these economic nuances, the interplay between cryptocurrency market dynamics, Federal Reserve policies, and bond yields will be critical to watch in the coming weeks.
Happy Trading!
The 1Konto Team
Elevate your institution's digital asset trading with 1KPrime. Reach out today for a consultation on our tailored solutions for best price liquidity and services in digital and fx.
Not Financial Advice Disclaimer