Tag: Bitcoin

How is the stock market faring, and what can we expect in Q4 2024? An analysis based on BlackRock’s quarterly report

BlackRock’s latest quarterly report on the stock market opens with a thought-provoking quote from Tony DeSpirito, the Global Chief Investment Officer: “The economy is not the stock market. And that’s good news.” This line suggests that the stock market may not necessarily follow suit even if the real economy slows down. Here, we break down BlackRock’s outlook for the stock market over the final quarter of 2024.

Stock Market: General Observations

The fourth quarter of 2024 promises to be a dynamic period for both the stock market and cryptocurrencies. BlackRock analysts predict that risk assets may experience heightened volatility, driven primarily by the upcoming U.S. elections and central banks’ potential rate cuts, especially by the Federal Reserve (Fed). Overall, BlackRock’s experts anticipate that rate cuts could bolster the stock market and create fresh investment opportunities.

However, the third quarter of 2024 was also marked by significant volatility, largely due to concerns over economic deceleration and recession risks. The Fed’s seemingly delayed response to these issues has added to market uncertainties. Despite these challenges, BlackRock’s report underscores that the fundamentals of the stock market have remained strong.

Two Sides of Volatility

The report delves into the topic of volatility, a critical factor in understanding the stock market’s outlook for the months ahead. BlackRock’s analysts remind us that while investor sentiment can move markets in the short term, fundamentals ultimately prevail over time. Investors should therefore stay focused on long-term value creation, even if the coming months bring sharp price swings.

Tony DeSpirito elaborates on the benefits of volatility with four key insights:

1. Volatility can be advantageous: Market corrections allow investors to increase their exposure to high-quality assets, particularly when these price drops stem from sentiment-driven events that don’t alter the asset’s underlying fundamentals. By taking advantage of dips, investors may strengthen their portfolios.
2. Volatility is normal: The stock market has always relied on its ups and downs to recover from major downturns, such as the 2008 financial crisis. BlackRock expects a similar scenario in the coming months, with peaks in volatility likely due to the Fed’s decisions.
3. Market corrections are common: Over the past 35 years, the S&P 500 has experienced 20 corrections of over 10%, yet it has delivered an average annual return of +14%. The takeaway is clear: investing with a long-term perspective can help investors ride out market fluctuations effectively.
4. Higher volatility can yield better returns: BlackRock’s data show that periods of increased volatility often lead to superior returns when the Volatility Index (VIX) remains below 12 points and six-month returns for the S&P 500 average around 5%. However, when the VIX hits 29 or higher, these returns jump to 16%. In short, volatility can drive short-term returns.

U.S. Elections and Their Impact on the Stock Market

The November U.S. elections are another major event that could influence the stock market this quarter. BlackRock has analysed how previous elections have affected stock performance, concluding that while election results often cause immediate price swings, the longer-term effects tend to be muted. Since 1996, only two out of seven elections have triggered post-election volatility lasting more than eleven months.

BlackRock’s message is clear: even during times of political uncertainty, investors should maintain a long-term view. History shows that the market has overcome many challenges since 1974, from presidential resignations to stagflation, the 1987 crash, the dot-com bubble, the 2008 crisis, and COVID-19. Patience, it seems, remains an invaluable virtue in the world of investing.

The Impact of Fed Rate Cuts

BlackRock’s report also explores the potential impact of Fed rate cuts on the stock market. The analysis confirms that stock markets tend to perform well when rates are reduced, especially if these cuts do not coincide with a recession. Historically, large-cap stocks have typically outperformed smaller-cap stocks for up to three years following the first rate cut.

When broken down by sector, the report shows that healthcare and consumer goods stocks tend to experience above-average growth in the year following an initial rate cut. This insight could benefit investors seeking defensive exposure in an uncertain environment.

And What About the Crypto Market?

In recent months, BlackRock and its CEO, Larry Fink, have shown a growing interest in cryptocurrency. BlackRock’s latest report highlights Bitcoin’s unique potential as a portfolio diversifier. Unlike traditional stock market assets, Bitcoin is largely uncorrelated with equities, which can provide additional resilience to a portfolio. Bitcoin’s rallies tend to be more explosive, offering investors a high-growth asset option with its own distinctive cycle.

Thanks to its secure, immutable blockchain technology, Bitcoin is viewed as a reliable store of value. Its Proof of Work system ensures that thousands of nodes and miners verify each transaction, providing unmatched security. This immutability and transparency set Bitcoin apart, cementing its position as a unique alternative asset for long-term investors.

Conclusion

The fourth quarter of 2024 presents both challenges and opportunities for the stock market. Investors can expect volatility to continue with the upcoming U.S. elections, potential rate cuts by the Fed, and ongoing global economic shifts. However, BlackRock’s analysis suggests that a long-term perspective and focus on fundamentals can help investors make the most of these market conditions.

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Bitcoin’s price surges on Chinese economic stimulus measures and strong ETF inflows. What’s next for Bitcoin this October?

Bitcoin has recently shown a surprising upturn, closing September with an impressive 8% increase. This performance defies the usual trend, as September is typically a weak month for the cryptocurrency. The drivers behind this growth are strong ETF inflows and significant liquidity injections from China, which have sparked optimism across global markets.

China Injects Capital and Cuts Repo Rates

Last Wednesday, China’s central bank announced a reduction in its interbank lending rates (repo rate) from 1.95% to 1.85%, complemented by a $10 billion liquidity injection and a 50-basis-point cut in the required reserve ratio (RRR) for banks. This move appears to be part of a larger economic stimulus package aimed at revitalising the economy with an anticipated ¥1 trillion (around $150 billion) in increased credit availability for banks.

This intervention seeks to counteract key economic challenges, including deflation driven by low consumer demand, a struggling real estate market, and high public debt. The effects have been immediate, with Asian stock indices like Hong Kong’s Hang Seng and Shanghai’s SSE surging 14% and 20%, respectively, since Thursday. This positive momentum also boosted the U.S. and crypto markets, although Bitcoin and other major cryptocurrencies have since eased, with BTC down by about 3% today.

China’s liquidity boost not only lifted Asian financial markets but also generated optimism among global investors. The repo rate cut and other measures are expected to increase the global money supply, with many analysts speculating that a portion of this liquidity may flow into riskier assets, including stocks and cryptocurrencies, in the coming weeks.

Impact on Investor Sentiment and Bitcoin’s Price

Bitcoin’s recent price surge is also tied to rising inflows into Bitcoin ETFs, further strengthening investor confidence. Last Friday, ETF inflows reached nearly $500 million, a level not seen since July. This significant capital flow into Bitcoin funds suggests renewed market optimism after prolonged stagnation.

Ethereum has also shown promising signs, with ETF inflows totalling $150 million over the past four trading days. This uptick comes after two challenging months for Ethereum ETFs, hinting at a potential shift in sentiment for the broader crypto market.

Will October Bring Renewed Momentum?

Despite minor pullbacks over the past 24 hours, optimism persists across markets. As we enter October, a historically bullish month for Bitcoin (often dubbed “Uptober”), will this mark the beginning of a sustained uptrend after over six months of sideways movement?Download the Young Platform app to stay updated on Bitcoin’s market dynamics and the global economic factors influencing cryptocurrency prices. Follow our weekly updates to stay ahead in the world of crypto investing.

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What impact will the US election have on the price of Bitcoin? According to Standard Chartered, they could cause the cryptocurrency to explode to the upside.

Many analysts believe Donald Trump’s victory in the upcoming US elections could favour Bitcoin and the cryptocurrency sector. Standard Chartered Bank, one of the UK’s most important financial companies, supports this thesis.

What is the basis for this belief’s recent spread? Should Donald Trump return to the White House, where could the price of Bitcoin go? Standard Chartered has updated its BTC price forecast to $150,000 by the end of 2024.

US elections: Why could a Trump victory be good?

The first aspect to consider in estimating the impact of Donald Trump’s inauguration on Capitol Hill is the regulatory one. The tycoon has reiterated several times that he has no intention of repressing the use of Bitcoin and, therefore, would not oppose the cryptocurrency sector should he win the US elections. One of the last statements on the subject dates back to March when Trump said on CNBC’s microphones that he was aware of and accepted the phenomenon, even though he reiterated his total and unconditional support for the dollar.

Another theory that accompanies the belief of those who expect a bullish crypto market in the event of a Donald Trump victory is related to the incumbents at the head of key government institutions. Should Joe Biden’s term, and with it the current Democratic term, come to an end, some heads could ‘jump’. 

The industry’s eyes are mainly on Gary Gensler, the chairman of the Securities and Exchange Commission (SEC) and its biggest antagonist in recent years. Gensler has long been linked to the Democratic Party, and therefore, a rise to power of the Republican faction could put his chair at risk.

As proof of this, in a video recently made public on X (formerly Twitter), Trump states that ‘they’, referring to the Democrats and Gary Gensler, are hostile to cryptos and jokes that, according to him, Joe Biden doesn’t even know what they are. In short, cryptocurrencies could find fertile ground within the institutions should Trump win the US elections on 5 November 2024.

Will Trump inject liquidity into the markets?

It is indeed worth noting that Donald Trump has favoured highly expansive monetary policies characterized by near-zero interest rates and debt monetization. These policies could have a significant impact on the price of Bitcoin in the event of his re-election in the 2024 US elections. This term refers to the tendency of governments to use central banks as buyers for their debt. In other words, when this scenario occurs, the Federal Reserve (FED) would issue new money to buy US government bonds. This scenario is particularly attractive when the public debt of the country in question is particularly high and, above all, when there is a risk that the markets begin to doubt its sustainability.

But what impact would this forcing of the economy have on the cryptocurrency sector? The only way to estimate this is to analyse data from the last Trump term, when interest rates were close to zero, such as ‘confidence’ in the US treasury market or US government bonds. Suffice it to say that during the first term, the average annual net sale of US government debt reached USD 207 billion, compared to USD 55 billion during the Biden presidency. The crypto and stock markets boomed at that juncture as they provided a hedge against de-dollarisation. One of the side effects of this practice is, in fact, currency devaluation, which is generated by increasing the amount of money circulating in an economic system.

Bitcoin price predictions

Having clarified the economic and regulatory environment, it is time to address the possible influence of the US elections on the price of Bitcoin. Obviously, it is impossible to know what will happen should Donald Trump return to the White House, but this does not stop industry commentators from publishing their predictions.
Standard Chartered’s, already anticipated in the introduction of this article, had more media resonance. For the UK bank, the price of Bitcoin will reach $150,000 by the end of 2024 should Donald Trump become the US president for the second time in history. But that is not all! According to Geoff Kendrick, Head of Crypto Research at the financial company, the value of a single Bitcoin could touch $200,000 in 2025.

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In the last few hours, we seem to be reliving the COVID-19 crash of 2020. Could the market restart after central bank intervention, as it did four years ago?

Over the past few days, fear has reigned in the crypto market, which has collapsed along with the stock market. During yesterday’s day, Bitcoin lost more than 15% of its value in less than twenty-four hours, while the NASDAQ and the S&P 500 lost about 5% and 3%. 

The week of 9 March 2020, the markets were shaken by a similar event, albeit characterised by a more pronounced bearish movement. At that time, the collapse was caused by the outbreak of the pandemic and the adoption of lockdown measures by most of the world’s countries.

Yesterday’s bearish movement, however, seems to have stemmed from a much broader spectrum of factors: the escalation of the conflict in the Middle East, the Japanese Central Bank’s cut in interest rates, and the consequent collapse of the Nikkei, the country’s main stock market index. Then, the crisis of US technology companies and the fear of an economic recession in the US were accentuated by the latest unemployment figures.

What are the similarities between these two market crashes? Not so much in terms of the causes and price movements that have already taken place as in terms of the possible responses of central banks and the associated price rebound.

Crypto market collapse: key figures

Yesterday’s crypto market crash was the most violent since 2022. The Crypto Total Market Cap, the total market capitalisation of cryptocurrencies, fell to $1.7 trillion at its most critical moment, registering a 15% drop. If we analyse the performance from the end of July onwards, the market capitalisation of the entire sector faced a 30% reduction due to the massive wave of liquidations.

The positions of many traders were forcibly closed, with a monetary counter-value of about $1.07 billion on centralised exchanges. The total value of those swept away on-chain, on DeFi protocols such as Aave or Curve, was around $350 million. Finally, the founding rates for Bitcoin and Ethereum futures turned negative. This means most investors have positioned themselves short and are betting on a further price collapse.

Some have dubbed yesterday, perhaps exaggerating, ‘Black Monday’, a profoundly negative day comparable to those of the pandemic era. Despite this, however, referring purely to the future scenario concerning the crypto market, it may not be the case to despair too much. There are several reasons to be cautiously optimistic about the future. For instance, the price performance of the most important cryptos in recent hours and the possible impact of an early rate cut by the Federal Reserve (FED), which is becoming increasingly likely.

Covid Crash: price movements

To analyse the current scenario, it may be useful to compare the current situation with the crypto market in 2020. At that juncture, in just a few days, the crypto market lost almost 50% of its total value. The crypto total market cap went from $228 billion to $118 billion, the price of Bitcoin went from $8,000 to almost $4,000, and Ethereum went from $270 to less than $100. Similarly, the performance of the stock market was also affected by the arrival of the pandemic. The S&P 500 lost about 35% of its value in less than a month, while the NASDAQ lost 30%. 

In the months immediately following, however, the market rebounded strongly, mainly due to the expansive monetary policies adopted by all the major central banks, which we will discuss in the next section. The price of Bitcoin, in the following 52 weeks, recorded +1,400%, or more than a x10. On the other hand, Ethereum rose by +1,500%, rising from $110 to $1,800, reaching its all-time high at $4,700 the following year. It was the same for the stock market, although the movements were much smaller in percentage terms. A year later, the S&P 500 and the NASDAQ almost doubled their value (+89% and +90%). Could we see the same scenario in the coming months?

In short, the ‘Covid Crash’ was a launching pad that allowed all assets to restart strongly after their respective corrections, but what was the petrol that allowed the engines of finance to restart?

The response of the central banks

As mentioned in the introduction, the most exciting part is not the price movements of the main assets but what happened afterward, i.e., the central banks’ response to the situation. This is because the main issues that caused these violent corrections seem similar.

On 12 March 2020, the Governing Council of the ECB (European Central Bank) implemented a package of monetary policy measures aimed at “supporting liquidity and financing conditions for households, businesses and banks and helping to preserve the smooth supply of credit to the real economy”. Then, on 18 March, the European Union announced a massive Quantitative Easing measure, i.e. an unconventional policy action to increase the supply of money in circulation, the Pandemic Emergency Purchase Plan (PEPP). The PEPP injected some EUR 1,850 billion into buying public and private bonds from March to December. Adding this figure to those of the other measures, such as the Targeted Longer-Term Refinancing Operations (TLTRO) and the Asset Purchase Program, launched in September 2019 at the end of the Draghi era, brings the total to almost EUR 3 trillion mobilised by the ECB over three years.

On the other hand, the FED, to stimulate the economy and shelter itself from the risk of recession, immediately cut interest rates, a measure that the ECB could not implement given that European rates had already been zero since 2016. Then, the FED continued with Quantitative Easing policies. It is estimated that the FED injected more than $3 trillion into the economy in the immediate aftermath of the pandemic.

What can happen in the coming weeks?

Is the recent crypto and stock market crash a sign that what happened in 2020 could be repeated in the coming weeks? According to most economists, this is possible since the latest US employment data show that the economy is weakening and the risk of a recession is growing.

Leading macroeconomic experts expect an extraordinary meeting through which interest rates will be reduced, at least as far as the US ‘front’ is concerned. For example, Austan Goolsbee, president of the Chicago Federal Reserve, stated in an interview with CNBC that the Fed is ready to intervene if the US economy deteriorates. The first sign of this came with the latest unemployment figure, which was worse than expected (4.3% instead of 4.1%). Even Elon Musk commented on this, calling the US Central Bank ‘foolish’ for not yet cutting interest rates, as the ECB has already done.

However, the differences from the pandemic period must be noticed too, especially about the size of the crypto world and its degree of adoption. In 2020, the sector’s total value was 10% of today’s, and the world’s most significant investment funds had yet to join this market. 

In conclusion, the current macroeconomic scenario is similar to that of 2020. Can the conflict in the Middle East, the ‘recessionary danger’ caused by more than two years of severely restrictive policies, rising unemployment, and the crisis of technology companies compose a sufficiently strong motive to push global economies to reignite?

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