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Recent significant fluctuations in the prices of gold and Bitcoin have seen international gold prices surpass the $2,100 per ounce mark, while Bitcoin briefly surged above $73,000. Analysts believe that a combination of factors, including safe-haven demand, investment speculation, expectations regarding the Federal Reserve's monetary policy, and changes in supply and demand dynamics, are the main drivers behind the substantial price increases in this round.
Bitcoin has been on a continuous rise since the fourth quarter of last year, with an accumulated increase of about 60% this year alone, and has experienced several significant ups and downs recently. In March, New York market gold futures briefly surpassed the $2,200 per ounce mark, marking an increase of over 5% for the month.
The surge in gold prices reflects, first and foremost, an increase in market risk aversion due to multiple considerations. From the escalation of the Ukraine crisis to the outbreak of new conflicts in the Middle East and the ongoing Red Sea crisis, central banks of many countries have been continuously increasing their gold holdings in recent years, leading to a sustained upward trend in gold prices.
While U.S. Treasury bonds are also considered "safe assets," the U.S. federal debt has exceeded $34 trillion since the beginning of this year. Former President of the Federal Reserve Bank of Dallas Richard Fisher previously stated that if the U.S. continues to borrow more money, the oversupply of bonds will eventually push up bond yields. This will create a vicious cycle of rising debt and increasing interest costs, requiring the U.S. government to allocate more money to repay its debt.
Since the escalation of the Ukraine crisis, the U.S. has frozen assets of the Russian central bank, banning Americans from trading with the Russian central bank, the Russian National Wealth Fund, and the Russian Ministry of Finance. This means that assets of the Russian central bank within the U.S. or assets controlled by Americans are frozen. In February 2022, the U.S. announced the freezing of billions of dollars of foreign exchange reserves held by the Afghan central bank. According to former Afghan central bank governor Ajmal Ahmady, the Afghan central bank holds about $9 billion in foreign exchange reserves, with about $7 billion held in U.S. banks. Analysts believe that central banks of many countries have begun to purchase gold on a large scale to avoid similar losses in certain situations.
With recent regulatory relaxations by U.S. regulatory authorities, there has been a surge in Bitcoin prices. This surge is not only due to the inability of traditional investment markets to meet investment or speculative demand, but also benefited from a historic relaxation of regulatory oversight by U.S. regulatory authorities, leading to a large influx of U.S. dollar funds into the Bitcoin spot exchange-traded fund (ETF) market. Although Bitcoin prices have experienced some retracement recently, as of March 18, the price of a single Bitcoin remained above $68,000, reaching near-record highs in recent years.
The U.S. Securities and Exchange Commission (SEC) approved Bitcoin spot ETFs in January this year, allowing several companies to apply for and trade Bitcoin spot ETFs. This means that institutional and retail investors can invest in Bitcoin through traditional stock accounts without directly holding Bitcoin.
Although SEC Chairman Gary Gensler stated in a statement that the commission's approval of the listing and trading of some Bitcoin spot ETF shares does not mean approval or endorsement of Bitcoin, investors should remain cautious about the risks associated with products related to Bitcoin and cryptocurrencies.
However, this has still stimulated investment, especially speculative demand, including international speculative capital speculation. Since the approval of Bitcoin spot ETFs in the U.S., the crypto market has begun to anticipate the prospects of other virtual currency spot ETF applications. Recently, not only Bitcoin, but the entire virtual currency market has experienced a wave of significant price increases.
For a long time, virtual currencies represented by Bitcoin, Ethereum, and Ripple have not been endorsed by sovereign credit, but are generated through algorithms. Therefore, there is considerable controversy within the industry as to whether virtual currencies can be considered currencies. However, changes in U.S. regulatory policies are seen by the market as an endorsement of virtual currencies, leading to a greater degree of market acceptance of their investment potential.
Experts say the impact of Bitcoin spot ETFs can be compared to that of gold ETFs. Since the introduction of gold ETFs, the gold market has experienced a long period of bullish sentiment and significant price increases. Bitcoin spot ETFs may follow a similar trajectory.
Whether in gold or Bitcoin, the recent price increases to some extent reflect changes in market expectations for dollar supply. Assets denominated in dollars are naturally negatively correlated with the dollar, so expectations regarding the Federal Reserve's monetary policy can to some extent affect changes in gold and Bitcoin prices. In addition, recent changes in the supply and demand dynamics of these two investment targets have also contributed to the price increases to some extent. Market analysts believe that the bullish trend in gold is due to market expectations of a Fed rate cut starting in June. As U.S. inflation pressures begin to ease, the end of the Fed rate hike cycle will lead to continued easing expectations, resulting in lower market interest rates and a weaker dollar, which will bring upward pressure on assets denominated in dollars.
In addition, changes in the supply and demand dynamics at the production level also affect market prices. In terms of gold, according to a recent report by the Nikkei, due to the gradual depletion of ore resources and the rising global labor costs, the production cost of gold has reached historically high levels, leading many to believe that mines operating at a loss will eventually stop production. Against the backdrop of global economic turmoil, gold, as a safe-haven asset, will continue to maintain high prices and still has the potential for further increases.
Regarding Bitcoin, according to media reports, April of this year will see the once-every-four-years "halving." Bitcoin is generated through a process called "mining," and due to algorithmic design limitations, the number of newly generated tokens will "halve" approximately every four years. This inherent deflationary feature creates its natural scarcity and also creates upward price expectations in the market. However, due to the lack of intrinsic value support for Bitcoin, under high volatility, there are many speculators who take profits at high levels, and it is said that many participants have experienced "liquidation." |
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Post time 28-3-2024 20:30:09