Research Summary
The report discusses the impact of macro trends on cryptocurrencies, focusing on the influence of the Federal Reserve’s rate hike and cut cycles, Bitcoin spot ETFs, the correlation between Bitcoin and Nasdaq, and the potential impact of the U.S. elections on cryptocurrencies. The report also explores the potential of a bull market in the coming year.
Key Takeaways
Correlation Between Cryptocurrency Market and Nasdaq
- Historical Correlation: The report highlights a historical correlation between the cryptocurrency market and the Nasdaq market, with the correlation being more stable over longer statistical cycles. Independent events, such as the Ethereum upgrade and SEC lawsuits, can cause fluctuations in this correlation.
- Impact of Federal Reserve Policies: Changes in interest rates significantly influence the volatility of the cryptocurrency market. The report suggests that while the cryptocurrency market may decouple in the short term due to independent events, it still shows some resonance with Nasdaq in the long term.
Impact of the Fed’s Rate Hikes and Cuts
- Negative Initial Impact: The report notes that the Federal Reserve’s initial rate hikes have a negative impact due to the significant marginal change in risk-free rates. However, as the number of hikes increases and the base grows, the marginal impact diminishes.
- Recovery Post Rate Hikes: After the end of rate hikes, the market often rebounds and may even enter a bull market stage. This rebound is attributed to the reduced marginal impact and the recovery of corporate earnings.
Bitcoin Spot ETFs
- Future Scale: The report suggests that Bitcoin ETFs could eventually reach 1% of the U.S. asset management scale. The number of institutions holding Bitcoin ETFs is increasing, indicating a potential for the actual allocation scale to exceed $97 billion in the coming year.
- Bitcoin Price Predictions: Depending on the allocation ratio of incremental funds and the market’s acceptance of Bitcoin, the report predicts that Bitcoin prices could range from $170,000 to $1.7 million.
U.S. Elections and Cryptocurrencies
- Impact on Bitcoin: The report suggests that in the current favorable macro environment, Bitcoin is unlikely to see significant short-term gains. However, if the economy stabilizes and cools down and the Federal Reserve successfully starts cutting rates, Bitcoin is likely to see a spike.
Bull Market Predictions
- End of Bull Market: The report notes that bull markets usually end when economic conditions are not very good. It suggests that this bull market, which has already lasted over a year, might see a deep adjustment by the end of this year or early next year.
- AI and Economic Cycles: The report introduces AI as a new variable that could significantly improve productivity or create new demand, potentially affecting economic cycle judgment.
Actionable Insights
- Understanding Market Correlations: Investors should consider the correlation between the cryptocurrency market and the Nasdaq market when making investment decisions. Understanding these correlations can help investors anticipate market movements and make informed decisions.
- Monitoring Federal Reserve Policies: Investors should closely monitor changes in Federal Reserve policies, particularly rate hikes and cuts, as these can significantly impact the cryptocurrency market.
- Exploring Bitcoin ETFs: Investors should explore Bitcoin ETFs as a potential investment opportunity. The increasing number of institutions holding Bitcoin ETFs suggests a growing acceptance of Bitcoin in the financial market.
- Considering Economic Conditions: Investors should consider the current economic conditions when making investment decisions. The end of a bull market is usually signaled by poor economic conditions, which could impact investment returns.
- Exploring AI’s Impact on Economic Cycles: Investors should explore the potential impact of AI on economic cycles. AI could significantly improve productivity or create new demand, potentially triggering a new wave of investment and demand.
