Gold Futures Rise Amid Fed Rate Cut Optimism, Will Crypto Market Mirror Recovery?

Gold futures have seen a significant rise, climbing 0.5% to $2,381 per troy ounce as U.S. Treasury yields have fallen. This increase is largely attributed to heightened expectations for a Federal Reserve interest rate cut. This follows soft U.S. retail sales data on Tuesday and inflation inching closer to the Fed’s target. Hence, netizens are speculating on a potential rebound for Bitcoin (BTC) and the entire crypto market.

Gold Vs Crypto Market

SP Angel analysts noted in a report that these economic indicators have boosted hopes for a rate reduction. The PPI on Friday also increased optimism around a Fed rate cut. Historically, gold prices have an inverse relationship with interest rates, as higher rates diminish the appeal of non-interest-bearing assets like gold.

Additionally, ongoing conflicts in the Middle East are driving investors towards safe-haven assets, further supporting gold prices. In parallel, the silver market is also experiencing gains, with London Bullion Market Association (LBMA) silver prices increasing by 2.6% to $30.23 an ounce, in line with the upward movement in gold.

In contrast, the crypto market is currently facing bearish sentiments. Bitcoin has dropped to $64,000, leading the decline among other major cryptocurrencies such as Ethereum (ETH), Solana (SOL), XRP, and LayerZero (ZRO). Despite the overall negative trend, Dogecoin (DOGE) managed to remain stable.

The global crypto market cap has decreased by 0.94% over the past day, now standing at $2.34 trillion. Despite the drop in market cap, the global crypto market volume has surged by 15.23% to $69.76 billion. Meanwhile, prominent market commentator Peter Schiff highlighted on X that Bitcoin has fallen by 14% since March 14, despite buying from 11 Spot Bitcoin ETFs.

However, he underscored that gold has risen by 10% in the same period. Moreover, he pointed out that investors who sold their gold ETFs to buy Bitcoin ETFs are now facing a 24% loss. Schiff also questioned how long it will take for them to realize their mistake.

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Will Crypto Market Recover?

Bitcoin is currently at a critical juncture, with the risk of an extended correction from its recent high of $70,000 looming large. The cryptocurrency is precariously close to key support at $60,000. As market instability increases, irrational selling driven by panic could exacerbate the situation, potentially leading to a significant drop, with altcoins likely following suit.

The outlook for Bitcoin is bleak, with the largest digital asset at risk of sliding to $50,000 before potentially recovering in the second half of 2024. Altcoins have similarly suffered, with Ethereum struggling to maintain support at $3,500, and Solana at risk of falling below $130 if bearish trends continue.

Currently, Bitcoin’s dominance stands at 51.2% while Ethereum holds a 17.4%. The enthusiasm seen in the market in May has waned, with Bitcoin bulls having pushed the price from $56,000 to nearly $72,000 before momentum stalled.

In addition, despite the approval of Spot Ethereum ETFs in the U.S. boosting sentiment and driving the fear and greed index to 74, recent performance has been disappointing. Furthermore, the Federal Reserve maintains a hawkish stance on rate cuts despite easing inflation. This has been a key factor in the downturn.

Additionally, Bitcoin miners are reportedly capitulating following the April halving, which reduced mining rewards from 6.25 to 3.125 BTC per block. This increase in selling pressure, combined with negative sentiment and weakening support levels, suggests a challenging period ahead for Bitcoin and the broader crypto market.

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