Bitcoin rises against the odds
- Bitcoin rallied despite concerns in broader markets
- Investors have opened their eyes to the so-called “Fed pivot”
- Markets appear to have begun to price negative developments in the US economy as bullish catalysts
posted surprising gains yesterday. Shares are also doing well for the second day in a row.
Ironic markets
Despite a worrisome macro landscape, Bitcoin, stocks and other stocks are enjoying gains in the week so far.
The moves are surprising considering recent hawkishness from the Federal Reserve, which has been resolute throughout the year in its commitment to raise interest rates. Risky assets like stocks and crypto typically suffer against such moves, but the Fed has shown little indication that it is willing to slow down.
Ironically, however, investors seem to view signs of weakness in the US economy (such as the report from the Bureau of Labor Statistics, which revealed a drop in job vacancies – from 11.2 million to 10.1 million) as positive signs for markets. The rationale behind such bullishness is that explicit signs of recession could force the Fed to reconsider its policy.
That hope was fueled yesterday by a plea from a United Nations agency for the Federal Reserve to dramatically slow or even halt its rate hikes. In a report published yesterday, the United Nations Conference on Trade and Development argued that the Fed’s aggressive rate hikes risk provoking a recession, with poor countries worst off.
The so-called “Fed pivot” will be a welcome development for crypto investors, at least in the short term. Market watchers have worried throughout the year that the Fed’s aggressive rate hikes could tip an economy bloated by quantitative easing into a full-scale recession. Nonetheless, all indications from the Fed are that it intends to stay the course, with Chairman Jerome Powell warning in August of “pain” ahead.
Bitcoin’s daily gains come in at a modest 3.64% at the time of writing; the bounce is nevertheless refreshing in the brutal and prolonged bear market. In fact, while stocks are also up today, last week’s stock market rout left Bitcoin largely unaffected. This has given some weight to the oft-cited theory that Bitcoin may one day decouple from stock performance, but the markets will need to produce a lot more data before such a trend can be verified.
Dissemination: At the time of writing, the author of this piece owned BTC, ETH and several other cryptocurrencies. The material presented in this article is for informational purposes only and should not be considered investment advice.
