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Last Updated on: 6th February 2024, 08:16 pm
Following a red-hot New Year, the hottest alternative assets—gold bullion and Bitcoin—have undergone a price correction over the past 30 days.
For Bitcoin, this was largely anticipated as the expected SEC approval of the eleven U.S. spot Bitcoin ETFs was “priced in” to the market months ago. The ETFs, which include Grayscale Bitcoin Trust and Blackrock’s iShares Bitcoin Trust, were approved by the federal regulatory agency on January 10, and now manage tens of billions of dollars worth of crypto assets.
As of February 1, Bitcoin is trading 2.7% lower against the U.S. dollar than it was at the start of the year. Some analysts are anticipating more short-run pain for Bitcoin as part of a protracted post-ETF correction that could last throughout Q1 2024—setting up a good opportunity for interim short-selling or buying at depressed prices.
After breaching its all-time high of $2,135 per troy ounce in late December, gold bullion bars have also seen a slight correction. The spot price of gold is currently down (-0.16%) over the past 30 days while remaining in the green by a margin of +6.51% on the year.
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.
Amid rising inflation and a hawkish Fed interest rate campaign, capital inflows into alternative markets have been limited. In January, there were no success stories among alternative assets; however, both gold and silver held their value to within half of a percentage point.
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FOMC the Key Player in Crypto Rally
Whether we’ll see alternatives rally in the months ahead depends squarely on Federal Reserve chair Jerome Powell and the Federal Open Market Committee (FOMC). Yesterday, Chairman Powell shot down any hope for a rate cut by March’s FOMC meeting.
This leaves the April 30 FOMC meeting as the next big potential inflection point in the alternatives market. If we see sustained inflation deceleration between February and April, it stands to reason that the Fed will start taking a dovish stance on interest rates.
Historically, the cryptocurrency market has seen its strongest periods of growth in low-interest rate environments. Bitcoin’s record high of $69,000 per token was reached in 2021, fueled by easy money, fiscal stimulus, and near-zero interest rates.
Geopolitical Tensions Have All Eyes on Gold
Gold’s price projections are more uncertain. Among several moving variables, perhaps the most significant is the security of logistics chains and capital markets in the Middle East. Gold rallied to an all-time high in Q4 2023 due, in large part, to concerns about a wider regional conflict spilling beyond the borders of Gaza.
Currently, Israel and Lebanon—the latter being home to an Iranian-backed militant group, Hezbollah—are on the brink of open, full-scale armed conflict. Similarly, Iranian proxy groups are continuing to disrupt trade routes through the Red Sea.
A regional war in the Middle East would directly influence the distribution and price of oil and demand for U.S. dollars, leading to increased interest in gold as a safe-haven hedge. Unfolding developments in this region will have an outsized impact on gold prices in the near term.
Gold IRAs Booming Amid Bullish Market Signals
As for now, the biggest players in the alternative asset markets are Jerome Powell and Israeli Prime Minister Benjamin Netanyahu. Inflation, interest rates, and global oil security are the factors to watch in the month ahead, as each of these variables will have an immediate impact on alternative asset prices.
While the global macroeconomic environment is in flux, the alternative assets market remains a bulwark of stability. To capture the upside potential of gold, silver, Bitcoin, and other alternative assets, consider investing in a self-directed alternative asset IRA today.