OKEX Investment Research: Asset prices have rebounded this week, interest rate cuts are good for gold and Bitcoin
Written by: OKEx analyst Yan Song
Written by: OKEx analyst Yan Song
Asset prices rebounded this week
Bitcoin reacts in real time to Fed's emergency rate cut decision
Lower interest rates are good for gold and bitcoin
In terms of rebound strength, gold has the strongest trend, recovering the previous decline, and is very likely to hit a new high this year in the near future, and stand above $1700; the Shanghai Composite Index followed closely, completely recovering the lost ground since February 23; The biggest weekly drop; Bitcoin and the US stock market are in the same trend, with a drop of about 9% since the 23rd. In the fixed income market, the 30-year U.S. bond yield fell below 1.5% for the first time, and the 10-year U.S. bond yield continued to drop below 1%, which also caused the price of U.S. bond prices to soar. This also makes the yield level of most fixed-income products lower than the US inflation rate, that is, the real interest rate is already negative. In addition, the USDT traded over-the-counter has experienced a sharp decline due to the rise in the RMB exchange rate.
image description
On the evening of March 3, Beijing time, the Federal Reserve announced that it would lower the short-term benchmark interest rate by 0.5 percentage points to a range between 1% and 1.25%. Bitcoin, on the other hand, reacted to the Fed’s decision last night in the same way as the U.S. stock market. It went up quickly after the decision was announced, and then began to fall due to unstable market sentiment. This should also be the first time that Bitcoin has reacted to the Fed's decision in real time, and the cryptocurrency market has become more interesting.
image description
Since February 26, the daily trading volume of Bitcoin futures has dropped from more than 20 billion US dollars to about 10 billion US dollars. Subsequently, the price of Bitcoin continued to operate within a relatively narrow range, and did not fluctuate as much as the U.S. stock market. It can also be seen from the daily trading volume of the OKEX quarterly contract that none of the single-day trading volumes for eight consecutive days exceeded the 20-day average.
image description
In addition, it can also be seen from the chart of the volatility difference between Bitcoin and the S&P 500 that the difference is in a downward trend, which proves that the volatility of the S&P 500 is rising, while Bitcoin is relatively less volatile. We can more optimistically estimate that when the stock market stabilizes, the trading volume of the Bitcoin market should pick up. At the same time, with the market's expectation of another interest rate cut, low-cost funds will further creatively look for targets that can capture returns.
image description
The market currently expects the Fed to cut another 50 basis points within two weeks, and the continued spread of the low interest rate environment will reduce the cost of holding gold and Bitcoin. CICC believes that although the global gold ETF has reached the highest level in history, the US SPDR gold ETF position is still 15% away from the historical highest level in 2009. In addition, we can see from the chart below that the US 30-year Treasury bond rate (inverted Y-axis coordinates) and the price of gold have almost coincided in the past ten years. Under the expectation of falling interest rates, the price of gold will have a lot of room to rise.
image description
Figure 5: Gold price (orange) vs US 30-year Treasury yield inversion curve (gray)
The computing power of Bitcoin has recently set an all-time high, with the hash value reaching 136 exahash per second (EH/s). Bitcoin's hashrate has grown 135-fold in four years, and this growth will continue as miners continue to invest.
Risk warning: This article does not constitute an investment recommendation. Investment is risky. Investment should consider personal risk tolerance. It is recommended to conduct an in-depth investigation of the project and carefully make your own investment decisions.
