• The crypto market saw a 50% increase in its overall market capitalization in the year to date.
• Goldman Sachs Group&Co. economists anticipate interest rate cuts as soon as Q2 2024, with quarterly pace of reductions from that point.
• The low correlation between Bitcoin and equities might be relieved by the liquidity crunch and more liquidity on the market in 2024.
Crypto Market Performance – Year-To-Date
The crypto market gave a choppy performance year-to-date but managed a 50% increase in its overall market capitalization, reaching $1.13 trillion on Aug 14. Total crypto valuation was tracked by TradingView.com.
Interest Rate Cuts Coming
The Federal Reserve has battled ballooning inflation throughout 2022 and 2023, raising interest rates in 11 separate revisions. Once inflation drops to the Fed’s desired level of 2%, it offsets the risks by implementing a series of interest rate cuts to avoid recession and ensure gross domestic product (GDP) growth. Economists of US financial giant Goldman Sachs Group&Co., including Jan Hatzius and David Mericle, anticipate a series of interest rate cuts as soon as Q2 2024, with a gradual, quarterly pace of reductions from that point. The FOMC is expected to skip the planned hike in Sep 2023, with 25 basis points of cuts per quarter penciled in but uncertain about the pace..
Impact On Crypto Sector
Despite the low correlation with equities, Bitcoin and the crypto sector overall might respond negatively to the liquidity crunch in 2023. And, vice versa, the interest rate cuts and more liquidity on the market might contribute to a bullish 2024 in the crypto sector.
Amount Of BTC & ETH Stored On Exchange
The amount of Bitcoin and Ethereum stored on exchanges continues to decline which is an indication that investors are expecting higher prices for these coins over time and holding them off exchanges rather than trading them actively for profits or losses over short periods of time . This is also indicative of investor confidence which could lead to further increases in value for both coins going into 2024 .
Bitcoin Halving Event In April 2024
Another factor that could lead to increased demand for Bitcoin is its halving event scheduled for April 2024 when network rewards will be cut down from 12 BTC per block mined to 6 BTC per block . This could lead miners who are already struggling due to rising transaction fees , difficulty levels , etc , out due to reduced revenue causing there positions being filled up by new miners looking at higher returns . This would drive up demand while reducing supply thus leading prices upwards .