ECB-Fed divergence and political upheaval could roil currencies and boost gold analysts warn

ECB-Fed divergence and political upheaval could roil currencies and boost gold, analysts warn

The European Central Bank (ECB) will issue its interest rate decision on Thursday morning, and while markets are not predicting any change to the rate at the April meeting, expectations are ramping up for them to kick off the cutting cycle soon.

But across the pond in the United States, a stronger-than-expected economy coupled with higher-than-expected inflation readings are pushing the prospect of rate cuts from the Federal Reserve further into the future.

Could the world’s two most influential central banks be on the verge of a divergence in interest rate policy? And if so, what are the implications for the euro, the dollar, and gold?

Marc Chandler, Managing Director at Bannockburn Global Forex, said that after last week’s softer-than-expected Eurozone CPI data, market participants see only a 10% chance of a rate cut at Thursday’s ECB meeting, but they now feel fairly confident of a June rate cut. “It's nearly fully discounted for June,” he said.

By contrast, Chandler said things appear to be moving in the opposite direction in the United States. “The futures market has not only moved away from the June Fed cut, which is around 50 percent or so now, but they've also downgraded the chances of a July cut,” he said. “For the first time since October last year, the market's not pricing in at least 25 basis points by July.”

Adam Button, Head of Currency Strategy at Forexlive.com, believes the ECB and the Fed are in very different positions, as the former faces political pressures and a popular reckoning in the near term.

“It's that generational aversion to inflation, and I think it's that political anger too,” Button said. “We have it everywhere in the world, the political anger about inflation, and you don't want that to be redirected at you if you're the central bank. This is their job.”

“I think the ECB is likely to embark on a consistent rate-cutting cycle, where the Fed may just dip in its toes.”

Chandler said that in the near term, he wouldn’t characterize the ECB starting its easing as a divergence from the Fed, but more of a head start down the same path. “I don't know how much of it is divergence and how much of it is just sequencing,” he said, noting that FOMC members including Powell and the Fed’s latest dot plots all point to multiple rate cuts at some point this year. “We're talking about sequentially, that the ECB might cut rates say, one or two months before the Fed.”

Chandler said he believes this is one of the factors that has weighed on the euro against the U.S. dollar, though it has shown resilience. “The euro last month, as this was beginning to be discounted, held the February low, which is around 107,” he pointed out.

European, U.S. growth closer than appearances

But Chandler said he doesn’t think the United States’ stronger economic performance is really a case of U.S. exceptionalism. “I think that the stronger growth in the U.S. can be accounted for by a budget deficit that's roughly twice the level of the Eurozone,” he said. “And I think that Europe has also been hit still with the disruption of Russia's invasion of Ukraine, and that has kept the energy prices in Europe higher than they are in the U.S. What we're seeing is the manufacturing sector in the Eurozone, especially in France and Germany, is still under pressure. The periphery, like Spain and Italy, ironically, are doing better.”

Button also sees much of the United States’ purported growth as a mirage. “They're running huge deficits,” he said. “That’s the big difference between Europe and the U.S. Europe isn't spending right now, the budget rules are pretty strict there, and the U.S. is spending massively. That might explain maybe half the difference in growth between Europe and the U.S.”

Chandler said that rising salaries in the United States, which are a problem in terms of inflation, are also a boon for growth data. “In the U.S., we've seen real wage increases, wages growing faster than inflation,” he said. “And that helps the consumer sector, which, as we know from recent data, including the Q4 data, continues to be a bright spot for the U.S. economy.”

Chandler pointed out that Fed Chair Jerome Powell frequently asserts that they need to see better inflation data to be more confident before cutting rates, and recent data is having the opposite effect. “The Fed says ‘we're data dependent,’ and the market takes a look at data and says, ‘Okay, it's going to take you a little bit longer to cut rates.’”

“Part of the problem is that the market's been talking about recessions for a couple of years now, and with the resilience of the U. S. economy, I think it's finally hitting them,” he said. “But to me, this is a contrarian indicator. Many economists have been talking about a recession for a couple of years, we don't get it, and now that the market capitulates and says, ‘Well, maybe the Fed's not going to have to cut rates as much as they thought,’ I think that's when the economy begins weakening.”

Chandler said that he expects Q1 growth to remain strong and noted that the Atlanta Fed GDP tracker is predicting a healthy 2. 8%, but that the coming months will bring the anticipated downturn on the back of “the accumulation of the financial tightening, the higher interest rates, the slowdown in credit extension, some deterioration below the surface in the full-time jobs group, for example.”

“What it really is, is a question of timing,” Chandler said. “Timing these things is very difficult, but getting the general direction, getting the pattern… I think the market once again postpones the downturn to the second half of the year.”
 

“One of the incredible things about the market is it’s an anticipatory mechanism,” he added. “Part of the reason why the euro is still under pressure is that the market's pricing exactly that scenario in.”

Button said the central banks’ policies could still look similar in the near term, but things are set to change in the coming years. “Say the Fed cuts 50 or 75 and ECB maybe about that,” he said. “It's in 2025 when the ECB will have that latitude to keep on cutting rates and the Fed might not. I think that's when you see that divergence open up. 2026 is when the U.S. really starts to stumble because that's when the IRA [Inflation Reduction Act] and the [CHIPS and Science Act] run out.”

But in the near term, if the ECB eases before the Fed, it could have real implications for their respective currencies, and for gold.

Chandler said that while much of the euro’s expected weakening in this scenario is priced in, there’s still a late move from the broader public. “There's a difference between institutional and retail investors,” he said. “I think oftentimes retail investors have other things on their plate, they're working, they've got family, and they wait for the news to come out. The news says ‘ECB cut rates, the Fed is not going to.’ And then they might decide to sell the euro. Meanwhile, institutional investors are anticipating these things. They're looking at the same things we are, like the swaps market, the futures market.”

Chandler said this can be clearly seen in the difference between the two-year yields on both sides of the pond. “The U.S. premium fell to about 165 basis points over Germany back in January, now it's at 190 basis points,” he said. “I think that's what's weighing on the euro.”

“What happens then is, say we get to June, the ECB cuts, the Fed doesn't and some traders, especially retail investors, say ‘oh, this is a policy divergence’ and they sell the euro. Meanwhile, the institutional investors which are already short the euro, buy it back because they think, now that the ECB has cut, what's the next move? The next move is going to be the Fed cut.”

Will Europeans get into gold?

Button also believes that the euro will come under pressure in the near term. “The question is whether Europeans turn to gold as a store of value,” he said. “At the margins, I think that could happen. This year, gold looks great in euros, and it's certainly not loved right now, so there is room for money to flow into gold there. But then you can also argue that if the dollar strengthens, a strong dollar isn't always great for gold.”

Still, he expects that if the broader European public finds itself “gripped by the feeling of a falling currency,” this would be “a natural driver” for gold. “I assume that 90, 95 percent of those real money flows go into other currencies, but that five percent is significant in a market like gold,” Button said. “Right now, gold is positioning itself as strong and I think that has a long way to run. The more good days that gold has, it's a snowball running downhill.”

“In all markets right now, the winners keep on winning and we’re in the most liquid time in history, the easiest time to trade in history,” he added. “So long as gold continues to rise, the money will find its way into gold. When Europe weakens, people look at gold. Maybe it's hard to buy the all-time highs. But since we broke out about $2100, what's the biggest dip? 30, 40 dollars? I think that's the best you're going to get.”

For his part, Chandler doesn’t see much chance of European investors piling into gold the way many Asian investors have, because the dynamics are very different.

“I was just looking at European bank shares, and they're doing great,” he said. “Japanese banks have done fairly well too, especially now that [the Bank of Japan] has raised interest rates. I think that for the same reasons that Americans don't own a lot of gold, I don't really expect Europe to buy a lot of gold.”

“I'm not sure that a rate cut from the ECB is a key catalyst,” he added. “I think that gold might rally, but I think gold's already rallying.”

Looking further out, Button does expect U.S. investors to pile into gold eventually, but when they do, it will be more of a greed trade than a fear trade.

“That's the exorbitant privilege of the U.S. dollar, is that Americans don't think about moving money into euros,” he said. “The Europeans do fret about the euro and fret about currencies. They have a long memory of domestic currency weakness, so they look for alternatives in the FX and the gold space, maybe crypto, when that weakness starts, whereas Americans are more inclined to look to gold.”

“When the dollar does eventually turn, Americans are buying.”

Button said that what needs to happen in the United States is for gold to capture the imagination of investors. “Once a market grabs the attention of the investing community right now, the moves can be phenomenal,” he said. “In a way, gold has already made an incredible move, but it hasn't quite got the attention yet. If gold and precious metals can recapture investor imagination like they did in the early 2000s, then you can't overstate the upside.”

“There's so much more money in capital markets than there was 15 years ago when that big gold bull market happened,” Button added. “Layer on leverage and options, and I think there's an opportunity to dream big. I don't know if it's the Fed cutting that kicks that off, or Asia, but I think price is the only thing that really matters and there's no need to risk overthinking it.”

Button pointed out that the environment of the past year has been terrible for gold, with high rates, every other market doing well, and crypto taking off. “And yet gold is at record highs,” he said. “I look at gold as a market that's taken the fundamentals’ worst punch.”

Continental shift could shake markets

Chandler said that the other major driver behind a potential divergence between the United States and Europe is the tectonic shift in the latter’s political landscape, which creates risks for currencies and commodities like gold. “There are European parliamentary elections in June,” he said. “And these polls show the current leadership in France and Germany with very low levels of support, which warns of a shift to the right.”

Button agreed that politics is the wild card on the continent, and it’s likely to impact markets in unforeseen ways. “Political changes is coming, and that could be the trigger for some kind of fear, uncertainty trade,” he said. “There was a brief period around COVID where the ideological cohesion in Europe was unprecedented. That fragmented quickly, and it will continue to fragment, I'm sure of it.”

“That is probably your best case for gold buying in Europe, and it's a pretty strong one,” Button said. “That's where I’d be watching, because I don't know if there's an incumbent party in Europe that's safe right now.”

“It won't surprise me to see further gains in gold,” said Chandler. “I'm not sure that the Chinese situation changes very much. I'm not sure the Turkish situation changes very much. For me, it's a really a story of what's going to change those forces. And I don't I don't see that on the horizon.”

Kitco Media

Ernest Hoffman

Time to Buy Gold and Silver

Tim Moseley

How to Thrive in Life

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https://rtateblogspot.com/2024/03/20/embarking-on-a-journey-of-self-discovery-exploring-the-factors-that-shape-your-path/

Tim Moseley

Bitcoin Primed For Multi-Billion-Dollar Boost With Hong Kong Greenlighting Spot BTC ETFs Next Week

Bitcoin Primed For Multi-Billion-Dollar Boost With Hong Kong Greenlighting Spot BTC ETFs Next Week

By Brenda Ngari – April 10, 2024

According to people familiar with the matter, regulators in Hong Kong are set to give the nod to a roster of applications for spot Bitcoin exchange-traded funds (ETF) as early as next week. This means the ETFs investing directly in Bitcoin could begin trading in April.

The expected approval of Hong Kong-based spot Bitcoin ETFs would take place approximately three months after the Securities and Exchange Commission approved the first cluster in the US.

As traditional institutional and retail investors in Hong Kong gain access to Bitcoin, the investment landscape stands on the cusp of a substantial shift.

Hong Kong Expedites Bitcoin ETF Approvals

Hong Kong is all set to become Asia’s first city to offer Bitcoin ETFs.

Sources familiar with the matter have told Reuters that Hong Kong’s Securities and Futures Commission (SFC) could greenlight its first set of spot Bitcoin (BTC) exchange-traded fund applications by April 15.

Harvest Hong Kong, Hong Kong units of China Asset Management, Harvest Fund Management, and Bosera Asset Management have already submitted applications for spot Bitcoin ETFs with the SFC.

As reported earlier by ZyCrypto, as many as 10 financial institutions have planned to apply to list BTC ETFs in Hong Kong. Reuters revealed that Hong Kong regulators have fast-tracked the approval process, making it likely for the funds to start trading this month.

Notably, Hong Kong regulators have been attempting to loosen their approach to crypto in recent months in an attempt to become a global hub for the sector.

A Game-Changer

Meanwhile, spot Bitcoin ETFs from Wall Street titans like BlackRock and Fidelity began trading on US exchanges in mid-January. They have accumulated roughly $58 billion in assets since then, despite constant outflows from Grayscale’s GBTC. The demand for these products propelled the largest cryptocurrency by market cap to a historic $73,737 last month.

The Asian crypto market is arguably much larger than the U.S. crypto market in terms of volume. This means that launching ETFs in Hong Kong could attract a significant amount of money into the funds.

The greenlighting process in Hong Kong is expected to follow a trend similar to that of the U.S., where the SEC approved multiple BTC ETFs simultaneously.

That being said, spot Bitcoin ETF approvals in Hong Kong are likely to encourage more investors and financial institutions to consider the benchmark crypto as a viable investment option.

DISCLAIMER The views expressed in the article are wholly those of the author and do not represent those of, nor should they be attributed to, ZyCrypto. This article is not meant to give financial advice. Please carry out your own research before investing in any of the various cryptocurrencies available.

The original article written by Brenda Ngari and posted on ZyCrypto.com.

Article reposted on Markethive by Jeffrey Sloe

** Loans, secure funding for business projects in the USA and around the world. Learn more about USA & International Financing at Commercial Funding International. **

Tim Moseley

Gold silver firmer as bull-market runs remain strong

Gold, silver firmer as bull-market runs remain strong

Gold prices are higher and hit another record high overnight, with June Comex gold reaching $2,384.50. Silver prices are slightly up and hit a nearly three-year high overnight, at $28.44 basis May Comex futures. More and more traders of all markets are climbing aboard the bullish gold and silver train, suggesting still more upside price potential in the near term. Save-haven buying remains a feature in both metals. June gold was last up $12.80 at $2,363.90. May silver was last up $0.073 at $27.875. Gold is presently outperforming the S&P 500 so far this year.

U.S. stock indexes are weaker near midday. It’s a quieter U.S. data day again Tuesday but the pace picks up Wednesday. The releases of the March consumer price index and the minutes of the last FOMC meeting will come at mid-week. The March CPI is seen coming in at up 3.4%, year-on-year. The core CPI, excluding food and energy, is seen at up 3.7% annually. Thursday comes the U.S. March producer price index and the European Central Bank monetary policy meeting.

The key outside markets today see the U.S. dollar index slightly lower. Nymex crude oil prices are weaker and trading around $85.75 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently fetching around 4.25%.

Technically, June gold futures bulls have the strong overall near-term technical advantage. A seven-week-old uptrend is in place on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $2,400.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,250.00. First resistance is seen at today’s contract high of $2,384.50 and then at $2,400.00. First support is seen at today’s low of $2,355.70 and then at this week’s low of $2,321.70. Wyckoff's Market Rating: 9.0.

May silver futures prices hit nearly three-year high today. The silver bulls have the solid overall near-term technical advantage. An accelerating seven-week-old price uptrend is in place on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $30.00. The next downside price objective for the bears is closing prices below solid support at $26.40. First resistance is seen at today’s high of $28.44 and then at $29.00. Next support is seen at today’s low of $27.725 and then at $27.50. Wyckoff's Market Rating: 8.0.

May N.Y. copper closed up 50 points at 428.10 cents today. Prices closed nearer the session low and hit a 14-month high early on today. The copper bulls have the solid overall near-term technical advantage. Prices are in a two-month-old uptrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical

resistance at 450.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 400.00 cents. First resistance is seen at today’s high of 433.35 cents and then at 437.50 cents. First support is seen at today’s low of 425.25 cents and then at 420.00 cents. Wyckoff's Market Rating: 8.0.

Kitco Media

Jim Wyckoff

Time to Buy Gold and Silver

Tim Moseley

Dogecoin Surpasses Ethereum XRP Solana As The Most Traded Coin After Bitcoin

Dogecoin Surpasses Ethereum, XRP, Solana As The Most Traded Coin After Bitcoin

By Brenda Ngari – April 9, 2024

In a noteworthy development for the cryptocurrency industry, the top meme coin Dogecoin (DOGE), has become the most traded altcoin on South Korea’s largest exchange, Upbit.

DOGE Draws Major Attention In South Korea

Dogecoin has claimed the title of the second most traded crypto on the popular South Korean exchange Upbit, in a clear display of the token’s skyrocketing popularity and appeal in global markets. DOGE has noticeably eclipsed other prominent cryptos like ether (ETH), Ripple’s XRP, and Solana (SOL) in terms of trading volume. This development is quite notable for the canine-themed cryptocurrency, which has registered a strong rally in recent months.

In cryptocurrency circles, South Korean traders are notorious for driving euphoric rallies on coins. Furthermore, the Asian country has emerged as one of the largest markets for crypto with a young, tech-friendly population. With its vibrant support for cryptocurrencies, Korea’s market serves as a yardstick for trends and changes in the global trading sentiment.

Dogecoin’s growth from a mere joke to a significant contender in the cryptosphere has been nothing short of remarkable. The prominent doggy-themed crypto seems well-positioned for tremendous growth within this rapidly evolving market.

Dogecoin is currently priced at $0.19, down 6% on the day amid a crypto market downturn, per data from CoinGecko. The crypto remains a far cry from its all-time high price of $0.73, posted in May 2021 at the height of the crypto bull market.

Bitcoin Dominates Upbit

Notably, Bitcoin, the largest token by market cap, remains the most traded crypto on Upbit. BTC has been on a steady uptrend since the beginning of 2024 amid anticipation and the subsequent approval of nearly a dozen US-based spot Bitcoin ETFs. Last month, the leading crypto rocketed to a new all-time high above $73K as the ETFs saw record inflows and trading volumes.

Although Bitcoin remains the world’s most popular and internationally accepted crypto, Dogecoin’s growing reputation on Upbit was quite unusual. Given DOGE’s rapid growth, it wouldn’t come as a surprise to see the top-ranking meme coin top Bitcoin on Upbit.

DISCLAIMER: None Of The Information You Read On ZyCrypto Should Be Regarded As Investment Advice. Cryptocurrencies Are Highly Volatile, Conduct Your Own Research Before Making Any Investment Decisions.

The original article written by Brenda Ngari and posted on ZyCrypto.com.

Article reposted on Markethive by Jeffrey Sloe

** Get secure funding for business projects in the USA and around the world. Learn more about USA & International Financing at Commercial Funding International. **

Tim Moseley

Pre-Halving Miracle? Crypto Analyst Envisions Bitcoin Hitting A Dizzying 220000 Before Halving

Pre-Halving Miracle? Crypto Analyst Envisions Bitcoin Hitting A Dizzying $220,000 Before Halving

By Brenda Ngari – April 9, 2024

Crypto strategist Gert van Lagen has put forward a daring prognosis that Bitcoin could rocket to a staggering $220,000 before the network’s impending halving event, which is to happen in roughly 11 days.

Amid a sea of traders and industry experts, Bitcoin is currently valued at $70,391, a notch up by 2.7%.

Major Spike Before Halving?

The forthcoming Bitcoin halving is eagerly awaited as a potential trigger for the next monumental bull market. However, analyst Gert van Lagen is predicting a seismic $220K price tag even before this pivotal event.

The chart attached to van Lagen’s forecast shows a classic Elliott Wave pattern, which suggests that markets move in predictable, repetitive cycles influenced by investor psychology. These cycles entail a five-wave phase followed by a three-wave corrective trend.

The pundit thinks the flagship crypto is currently in the third phase. Going forward, BTC could encounter a pullback before entering its fourth and fifth price eruption phases. But in his opinion, the current third phase might turn out to be the most bullish, with a vertical rally in this blow-off phase.

Notably, Elliott Wave Theory should be taken with a healthy grain of salt. The theory is mainly slammed for its subjectivity as different traders can interpret the patterns differently — which can result in varying predictions that may be inaccurate.

Bitcoin Has “Room To Run”

Bitcoin is currently flirting with the $72,000 level after experiencing a lull last week. It’s now 2.7% off its all-time high of $73,737, according to data from CoinGecko. It hit that milestone in March.

Meanwhile, SkyBridge Capital boss Anthony Scaramucci recently told CNBC that Bitcoin could climb to as high as $170K during the cycle and could ultimately change hands at around half the value of the global gold market.

“I’m simply saying it could trade to half the valuation of gold, which is around six to eight to 10 times move from here.”

Scaramucci, however, warned that “it’s not going to happen overnight” and there will be high volatility along the way.

Bitcoin currently boasts a market capitalization of $1.4 trillion, while gold commands a total value of nearly $16 trillion. If BTC were to trade at half the market cap of gold, its value would need to increase at least six times from current levels, which would translate to a price of roughly $400,000 per coin.

DISCLAIMER

The views expressed in the article are wholly those of the author and do not represent those of, nor should they be attributed to, ZyCrypto. This article is not meant to give financial advice. Please carry out your own research before investing in any of the various cryptocurrencies available.

The original article written by Brenda Ngari and posted on Zycrypto.com.

Article reposted on Markethive by Jeffrey Sloe

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Tim Moseley

The gold price is up nearly 19 in this rally but you haven’t seen anything yet – abrdn’s Robert Minter

The gold price is up nearly 19% in this rally, but you haven’t seen anything yet – abrdn’s Robert Minter

Although Western investors continue to ignore gold even as prices continue to hit record highs, they are no longer actively getting in the way of higher prices, which means the current rally has legs to run higher, according to one market analyst.

In an interview with Kitco News, Robert Minter, Director Of Investment Strategy at abrdn, said that gold’s rally to record highs above $2,350 an ounce is just getting started, and it's only a matter of time before retail investors jump into gold-backed exchange-traded funds to kick off the next major leg higher.

Minter’s comments come as abrdn celebrates a significant milestone with its gold-backed ETF. Last week, assets under management in abrdn Physical Gold Shares ETF (NYSE: SGOL) surpassed $3 billion for the first time.

Although investment demand remains somewhat lukewarm, Minter said gold investors should be content that at least the selling has stopped.

Minter explained that since April 2022, ETF investors have sold around 750 tonnes of gold, creating a massive supply in the marketplace that was met with two years of historic demand from central banks.

Minter pointed out that central bank demand hasn’t gone away; however, the supply of gold has dried up as ETF selling has slowed to a trickle. Although central bank gold buying has slowed in recent weeks, Minter said the overall trend in official purchases remains higher.

“If you were a prudent central bank fund manager in some of these countries, you would diversify away from the dollar to reduce your risk, plain and simple,” he said.

However, the broader question remains: when will Western investors embrace gold again? Minter said that he expects Western investors are waiting for an actual rate cut from the Federal Reserve.

Despite new insight from a bevy of central bankers last week, the Federal Reserve has remained somewhat coy on the start of the next easing cycle. Some monetary policy committee members have said they would be reluctant to cut interest rates as inflation remains elevated.

While the timing of the Federal Reserve’s easing cycle remains a moving target, Minter said that there is no question that interest rates will have to come down.

With credit card debt at record highs, insurance premiums rising across the board, and government debt growing out of control, the U.S. economy can’t afford to keep interest rates in restrictive territory much longer, Minter said.

“The Fed has made enough mistakes in the last three years that I think they're very cautious not to make another,” he said. “If you were the Chair, you would have to know the impact of the magnitude of the rate rises you've done in a short time will have on the economy. This kind of monetary policy usually breaks something in the economy on a structural level, and you have to play catch up really quickly. You certainly wouldn't risk much higher unemployment just to bring housing inflation down a few tenths of a percent.”

Even if the Fed holds rates unchanged through the summer, Minter said that he still expects to see rate cuts and the start of a new easing cycle before the end of the year.

Since holding support at $2,000 in early February, gold prices have rallied nearly 19%, with prices hitting a new intraday-day at $2372.50 an ounce early Monday. However, Minter said there is still significant value in the gold market even after this rally.

“Regardless of timing or magnitude, the next Fed funds move is a cut, and historically, that led to 57%, 235%, and 69% gold price increases in 2000, 2006, and 2018,” he said. “Even with prices up 18%, we haven’t seen anything yet.”

Kitco Media

Neils Christensen

Time to Buy Gold and Silver

Tim Moseley

What Is Altcoin Season? When Will It Start? Or Is It Already Here?

What Is Altcoin Season? When Will It Start? Or Is It Already Here?

Altcoin season, a term on the lips of many cryptocurrency enthusiasts since Bitcoin's recent surge to unprecedented heights, is a phenomenon many have eagerly anticipated. However, despite this anticipation, only a select few coins and tokens, along with many meme coins, have experienced substantial growth. This has led to speculation that altcoin season may never arrive, as funds flowing into spot Bitcoin ETFs may not be redirected towards the broader cryptocurrency market. But is this the full story?

With the invaluable insights of some highly credible crypto experts, this article takes a deep dive into the current state of the cryptocurrency market. It focuses on the 'altcoin season' concept and its potential impact on market trends. The article explores why altcoin season has yet to occur and predicts when it may begin. It also offers insights on how to recognize its onset. Additionally, the article highlights the types of alternative cryptocurrencies (altcoins) that may be worth watching during this period.

The Concept of Altcoin Season

Firstly, let's touch on the concept of altcoin season, a term that lacks a universally accepted definition. Some assume it refers to a period where numerous altcoins are experiencing a surge in value, with many believing that it's already underway. Given the recent performance of certain altcoins, one could argue that it's already here. However, this definition falls short of accurately capturing the concept, so here’s a more precise and nuanced explanation.

An altcoin season is an extended timeframe during which most alternative coins exhibit notable outperformance compared to Bitcoin. This can be gauged by analyzing the price of an altcoin with Bitcoin, for example, ETH/BTC. When assessing the BTC pair for various altcoins, it becomes evident that their performance has not been particularly strong. However, this does not imply that they have not experienced price increases in fiat currency; rather, it indicates that their gains have been comparatively lower when measured against Bitcoin. 

The current situation with ETH and BTC is a significant development in the cryptocurrency market. ETH's value has decreased compared to BTC, which has raised concerns among traders and investors. Historically, increases in BTC's value have often been followed by a shift in investments towards alternative cryptocurrencies, leading to a period where most altcoins perform better than BTC. 


Source: Coinmarketcap

In the past, the trend has been to invest in ETH and then move on to other major alternative cryptocurrencies, followed by mid-cap and small-cap altcoins. It is important to note that this progression is not always precise but generally aligns with the idea that investors gravitate towards more speculative crypto assets as market momentum continues. Interestingly, in the current scenario, there has been limited shifting of funds into ETH, as indicated by the underperformance of the ETH/BTC pair mentioned earlier.

Furthermore, it appears that the influx of capital did not favor midcaps and small-caps but instead directed attention towards micro-cap meme coins for speculative purposes. It is important to note that while certain altcoins like Solana's SOL have shown impressive performance compared to BTC, most altcoins, including ETH, have not surpassed BTC's growth. This suggests that the altcoin season may have yet to arrive fully.

As indicated earlier, cryptocurrencies with smaller market capitalizations tend to be riskier. This is because crypto with a smaller market cap has the potential to experience more significant and rapid price increases compared to those with larger market caps. However, on the flip side, small-cap cryptocurrencies are also prone to more substantial drops in value, highlighting the risk/reward ratio. 

The notable 100x returns often associated with certain altcoins are typically achievable with those that have smaller market caps, explaining the hype around the altcoin season. Nevertheless, there are indications that the current cryptocurrency market cycle differs from previous ones, which could have significant implications for the returns on altcoins.

The Question on Everyone's Mind: When Will Altcoin Season Arrive?

Many wonder why the current market cycle hasn't followed the same pattern as previous ones, with altcoins yet to take center stage. To understand this, we must first acknowledge the unique factor setting this cycle apart: spot Bitcoin ETFs.  As discussed earlier, some believe these ETFs are hindering the rotation into altcoins, as investors cannot easily switch from ETFs to altcoins, at least in theory. However, some investors may be cashing out their ETF gains and moving their funds to cryptocurrency exchanges like Coinbase, where they can invest in altcoins. 

The catch is that most investors in spot Bitcoin ETFs are not your average retail investors but seasoned institutional investors. These institutional investors, also known as TradFi whales, have a significant influence on the market. As a result, their preferences for alternative cryptocurrencies may diverge from those of the typical crypto enthusiast. Notably, there has been substantial institutional interest in SOL, which could explain its outperformance compared to BTC. 

However, the crypto market is not solely composed of institutional investors. There are two other types of crypto investors: crypto whales and retail investors. Crypto whales, which are large holders of cryptocurrencies, have been the primary influencers in the crypto market so far. Their shift from Bitcoin to alternative coins has led to past cycles in altcoins, while retail investors have pushed these coins to their peak values. Put simply, the crypto market has not lost anything. It has merely introduced a new main character, figuratively speaking. 

The lack of an alt season is not caused by the introduction of ETFs but rather by the actions of crypto whales and retail investors. The analysts at Coinbureau suggest that these crypto whales are not shifting their investments or rotating into altcoins because there currently needs to be more retail investors interested in purchasing them.


Source: Crypto Max on X

Numerous indicators suggest that retail investors are gradually becoming more interested in cryptocurrency despite their limited participation in the current market upswing. This is evidenced by increased retail trading activity on cryptocurrency exchanges, the growing popularity of crypto exchange apps, rising search volumes for crypto-related terms, and heightened social media engagement with crypto content. However, these metrics have not reached the levels indicating a massive influx of new retail investors into the cryptocurrency market.

The crucial factor here is the influx of new retail investors. While millions of retail investors from previous cycles are still active or returning, we need to see more new entrants into the market. This is a significant concern, as altcoins rely heavily on new investors to drive their growth and create upward momentum. As a retail investor, you can influence the altcoin season. There need to be marginal buyers.

As Coinbureau states, “We need new people for our altcoin bags to pump, probably because most of us have already allocated as much as we can to our favorite coins and tokens. In the absence of these new people, there's not that much for us to do except speculate on memecoins, and it's quite possible that the memecoin pumps we've seen have been coordinated by the crypto whales. They probably know that the only retail investors around right now are experienced enough to use DEXs.” 

The Onset of Altcoin Season

After analyzing the delay in the arrival of altcoin season, the next question is when we can expect it to begin. The straightforward answer is that it will start when a sufficient number of retail investors take notice. This will prompt crypto whales to shift their focus from Bitcoin to altcoins that retail investors will then eagerly buy into, leading to a chain reaction of FOMO (fear of missing out). However, a more in-depth analysis, which necessitates a look back at the previous cycle, reveals a more intricate scenario. Most of us envision the upcoming altcoin season as a repeat of the last cycle, but the reality may be more complex. 

The issue lies in the significant differences observed in the previous cycle. Due to a worldwide pandemic, billions of individuals were confined to their homes while a few hundred million received a stimulus payment, providing them additional funds. These events led to widespread speculation in both stocks and cryptocurrencies. Today, the situation is starkly contrasted as interest rates across various nations are at their highest levels in years. Unofficial inflation rates are soaring in most countries, reaching double digits. Several countries are experiencing or nearing recession.

Above all, most individuals are reportedly accumulating unprecedented levels of debt to maintain their standard of living. This trend starkly contrasts with the circumstances observed during the previous alt season. A positive aspect is that the prolonged persistence of these conditions may prompt governments and central banks to provide comparable forms of economic support, never mind the possibility of an existential shock. 

This means that there will likely come a time when economic conditions mirror those seen during the pandemic, with similar fiscal and monetary support levels. The exact timing is uncertain, but it may take a significant event to prompt such action. Identical to past patterns, this could cause a brief decline in cryptocurrency and other asset values, followed by a stabilization period and a sharp price increase as the stimulus takes effect.

If the current state of the market persists, altcoins may suffer under unfavorable circumstances. If trends continue, including high interest rates, rising inflation, recurring recessions, and mounting retail debt, the subsequent altcoin season may fall short of expectations. It's essential to recognize that the cryptocurrency market has undergone significant changes since the previous cycle, with factors beyond spot Bitcoin ETFs contributing to its evolution. 

Regulations in the US, UK, and other countries have made it more difficult for retail investors to reach offshore trading platforms where highly speculative altcoins are traded. The upcoming EU stablecoins regulations are anticipated to impact the cryptocurrency market significantly. It has been announced that USD stablecoins will no longer be allowed in the EU by the end of the year, potentially reducing the options for retail investors to trade cryptocurrencies.

Identifying the Arrival of Altcoin Season

To determine the onset of the altcoin season, keep a close eye on several key indicators. These include retail trading volume, the popularity of crypto exchange apps, Google searches, and social media views related to cryptocurrency. When you observe a steady increase in these metrics, alt season is likely imminent. Interestingly, there are signs that this trend may already be underway. For instance, search queries related to buying cryptocurrency have started to rise after years of stagnation, although they still have a long way to go before reaching their previous peak.


Source: Google Trends

The current market dynamics are making it challenging to determine whether we are witnessing the inception of a new alt season or a fleeting speculative surge. A valuable approach to shed light on this puzzle is examining how cryptocurrency projects promote themselves, specifically during periods of heightened attention. A typical pattern among cryptocurrency projects is to unveil significant announcements when public interest is at its peak.

There have been instances where crypto projects have postponed significant updates and announcements due to a lack of interest from retail investors. Despite this, numerous crypto projects have been making notable announcements, which could suggest the beginning of a new altcoin season. However, these announcements have not resulted in significant speculative buying, indicating that retail investors remain scarce.


Source: CoinMarketCal

As the popularity of cryptocurrency projects grows, you may notice a surge in big announcements and subsequent price increases for their coins or tokens. This is often a sign that retail investors have entered the market. When these altcoin announcements start making headlines in mainstream news, it could indicate that the market is nearing its peak. 

Some of you have probably encountered additional key indicators, like inquiries from friends and family regarding the crypto market or, worse, seeking advice on investing in meme coins. However, these signals may not hold much weight unless individuals actively invest. Suppose widespread media coverage of altcoins is not leading to a substantial market increase, and your acquaintances are not showing significant interest. In that case, it may not truly be an alt season. 

A possible indicator of an impending alt season is to evaluate whether these signs are present when, based on historical patterns, an altcoin season would be expected to occur from a cycle perspective. However, this can be difficult to determine as the introduction of spot Bitcoin ETFs has disrupted the typical cycle. For reference, the current phase of the cycle should resemble the early 2020 period, characterized by gradually increasing prices followed by a sudden crash triggered by an unexpected event before ultimately continuing their upward trend.

It's worth considering that our timeline may be advancing at an accelerated pace. Specifically, we could be closer to the late 2020 stage of the crypto market cycle, irrespective of the introduction of Bitcoin ETFs. With two completed crypto cycles (2017 and 2021) under their belts, millions of individuals are now familiar with the narrative and its subsequent developments.


Source: Bitcoin News on X

The impact is that we won't have to wait 12 months for the altcoin season to begin like we did in 2020. Instead, it could start in just a few months. However, this is based on the assumption that we're on an accelerated timeline. It's possible that cryptocurrency is still following the same schedule, which means we might be ahead of schedule for alt season.

Which Altcoins Should Be Monitored

Which altcoins should you watch this season? I concur with Coinbureau that it might be ideal to start building up your portfolio if we are in the early stages of the altcoin season. However, it's essential to note that this is not financial advice, and it's equally possible it's not the best time to do so.

Coinbureau analysts suggest that the altcoins you must watch this season will be the most accessible to retail investors.  As mentioned earlier, EU regulations and, consequently, the structure of the crypto market will ensure that most retail investing will take place on onshore exchanges like Coinbase. In light of this potential scenario, focusing on altcoins listed on Coinbase may be prudent.

This is connected to a previous point about market capitalization. The higher the market cap, the lower the risk and the potential reward. The smaller the market cap, the bigger the risk, but the bigger the reward. Selecting a cryptocurrency with a lower price tag may also be advantageous. Many individual investors assume that a lower price indicates the possibility of more significant price increases, but the market cap is the most important. Therefore, by choosing a low price and market cap cryptocurrency, you can establish some solid fundamentals, often referred to by some influencers as "pumpamentals."

While being listed on Coinbase and having a low price point and market capitalization can benefit an altcoin, more is needed to guarantee success. For an altcoin to truly thrive, it must fit into a broader, bullish narrative that resonates with the average retail investor. This article explores the dominant narratives likely to drive the next bull market.


Image: Markethive.com

Researching the tokenomics of the crypto you want to invest in is vital to ensure it is genuine and has maximum potential. This involves examining the future circulation of coins or tokens, as you wouldn't want to invest in a promising altcoin only to face a sudden sell-off by the developers and their venture capital supporters. Also, you need to select a smart contract cryptocurrency on which the most promising tokens are trading. 


Image: Cointelegraph

It is essential to understand that holding onto a promising altcoin for a longer term could be beneficial if you enter the market at the right time. Numerous cryptocurrency enthusiasts can confirm that they would have been equally successful today if they had kept their altcoins during the market downturn. Cryptocurrency, at its core, is designed to revolutionize various systems, so it's important to have a long-term perspective on your investments.

Although many of these systems and their associated projects may fail, a few will endure. The ones that survive have the potential to become extremely valuable, possibly even worth trillions of dollars in the future, much like Bitcoin, which is currently valued at over $1 trillion. It is crucial to note that BTC boasts the lengthiest and most proven track record among all coins and tokens, rendering it the most secure cryptocurrency to retain in comparison.

Other cryptos will more than likely someday achieve the same safe haven status as BTC, so considering all the key indicators along with a crypto’s community, utility and purpose, ecosystem, and solutions it offers in the spectrum, it shouldn’t be too hard to work out which ones to watch out for. For that large-cap security, you might want to consider investing in the original cryptocurrency that has the potential to become the global reserve currency

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

 


 

Editor and Chief Markethive: Deb Williams. (Australia) I thrive on progress and champion freedom of speech.  I embrace "Change" with a passion, and my purpose in life is to enlighten people to accept and move forward with enthusiasm. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.

 

 

 

 

 

Tim Moseley

Gold’s 2024 price ceiling is now the floor silver is approaching sweet spot’ for investors MKS Pamp

Gold’s 2024 price ceiling is now the floor, silver is approaching ‘sweet spot’ for investors – MKS Pamp

The first quarter of 2024 was all about gold, according to an updated outlook from MKS Pamp. “We were not bullish enough Gold in Q1’24 and were too bullish Silver and Platinum,” the analysts said, “but the relative outperformance between Gold and the white metals (Silver & PGMs) should compress in Q2’24 & Q3’24.”

In their recently published Precious Metals Outlook 2024 – Revised Forecasts, the Swiss precious metals giant broke down the sector’s performance in detail, and laid out their adjusted predictions for the remainder of the year.

 

The analysts wrote that gold has shown sensitivity to central banks’ tolerance of higher rates to address sticky inflation.

“Original Forecast $2050/oz (mildly bullish vs the street) is now upgraded to $2200/oz (outright bullish) as Gold sniffs out a collective turn in major CB policy willing to accept higher for long inflation, amidst solid physical demand,” they wrote. “Our original 2024 forecast published in January was $2050/oz (high-low range of $1900-$2200/oz), hinging on the Fed cutting rates as the global economy slowed. We also expected new all-time highs. So far Gold has already taken out our high price forecast of $2200/oz with the timing as expected as Gold preempts a Fed rate cutting cycle, while Central Bank and physical demand remains relentless.”

They noted that one of their bull cases was based on “Asian or CB physical demand being stronger than expected” and this “has played out (earlier than expected) and is the game changing development behind higher [price] floors.”

Among the factors that did not align with their original forecasts were interest rate cuts being pushed further back while the U.S. economy continued to outperform. “We also expected an underinvested investor community to subscribe in a meaningful way and drive the price rerating which has not been the case (so far),” they said. “We did not expect the emergence of an accelerated physical purchasing program” driven by runaway Chinese demand, which has propelled “shallower dips and a persistent rally that has not been short-lived as in the past 4 peaks seen post-COVID.”

They also pointed out that “both producer-related and secondary supply has not reengaged (as expected) at price peaks, and that lack of structural selling has allowed Gold to float higher.”

The updated forecasts now have gold averaging $2,200 per ounce in 2024, with a new higher floor of $2,000. “We also now expect Gold to print bull market gains in 2024 that is emblematic of past rate cutting cycles; that equates to $2475/oz (and almost $2600/oz if one accounts for the annual cost of carry,” they wrote.

Among the risks to their updated bullish forecasts, MKS Pamp notes that now everyone is bullish. “Banks are revising up forecasts and consensus for Gold has shifted in one direction,” they said, but offered the caveat that market positioning is not yet reflecting this. “Western investor positioning still remains underweight on a long-term historical Gold basis, vs the liquidity & holdings in other asset classes and commodities remain undersubscribed as an asset class.”

Other threats include “large Gold holders (including Central Banks) monetizing Gold if 1) they are forced to (eg: the financing of hot & cold wars), 2) Gold loses appeal as a geopolitical or inflation hedge and/or 3) Gold comes under direct sanction and policy risk,” as well as the potential for “strong secondary physical sales from retail coin & bar holders, globally, which has not been ignited.”

Turning to silver, the analysts wrote that a sweet spot is beginning to emerge, but investor demand must increase to get it there.

“Silver continues to have an attractive micro/fundamental story heading into a collective Central Bank rate cutting cycle (as is the case with Copper and to a lesser degree Platinum),” they said. “The market understands the structural supply challenges in these cyclical transition metals, but the demand story isn’t materializing the way bulls think it should, including investment demand which remains static.”

The analysts acknowledged that investors don’t have the patience to eat monthly losses as they wait for moves in a high interest rate environment, which helps to explain why silver and the PGMs are so under owned, but supply constraints will still push prices higher.

“Silver moved into a structural deficit in 2021 driven largely by energy-related industry demand (PV, auto etc) and has posted deficits averaging ~250mn oz the past 3 years including 2024,” they wrote. “While above ground stocks have managed to fulfill those annual deficits, known inventories – the free float – is back down near cyclical lows. The case for a ‘gradually then suddenly’ setup is developing and thus we marginally hike our already quite bullish forecast ($25/oz) to $25.50 and expect the Gold/Silver ratio to trade toward the lower end (~86) of its YTD range.”

Kitco Media

Ernest Hoffman

Time to Buy Gold and Silver

Tim Moseley

Gold price sees another 5 rally this week as geopolitical uncertainty drives the market to touch 2350

Gold price sees another 5% rally this week as geopolitical uncertainty drives the market to touch $2350

he gold market continues its unstoppable run to record highs as it touches an all-time high of $2,350 an ounce ahead of the weekend.

Gold’s latest rally comes after the U.S. economy created 303,000 jobs in March, significantly beating expectations. At the same time, unemployment dropped to 3.8%. Despite the robust job growth, wages were relatively muted, rising 0.3%, in line with expectations.

Economists described the latest nonfarm payrolls data as a “blockbuster report,” which supports higher bond yields and relative strength of the U.S. dollar. Bond yields have risen as the market continues to shift their expectations regarding the start of the Federal Reserve’s easing cycle.

This past week, members of the Federal Open Market Committee have been fairly evasive on the topic of interest rate cuts. According to the CME FedWatch Tool, markets see a 54% chance of a rate cut in June. Last week, markets were pricing in a more than 60% chance of easing.

Analysts note this should be a hostile environment for gold; however, June gold futures last traded at $2,345.50 an ounce, up 1.60% on the day. The precious metal is up nearly 5% from last Friday.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said that he suspects gold is attracting some safe-haven flows as geopolitical tensions in the Middle East heat up because of Israel’s war with Hamas in Gaza.

This week, Commander of Iran's Revolutionary Guard, Gen. Hossein Salami, vowed retaliation after an airstrike on an Iranian diplomatic compound in Syria killed seven members of the military group, including two generals.

In a social media post, Marin Katusa, founder of Katusa Research, gold’s safe-haven bid.

Time to Buy Gold and Silver

Tim Moseley

The Artist that came out of the Winter