Financial markets experienced a return to volatility on Wednesday as traders grappled with uncertainty surrounding the Federal Reserve’s future moves and rising recession concerns. Analysts pointed to an expected increase in the M2 money supply and global liquidity resulting from lower interest rates as a key factor in market dynamics.
“Liquidity is expanding, driving asset prices higher—a trend linked to the increasing U.S. M2 money supply and the expanding balance sheets of major central banks,” said analysts at Secure Digital Markets. “China’s aggressive monetary easing, coupled with the Fed‘s recent 50 basis point rate cut, has significantly influenced market momentum.”
They emphasized the importance of macroeconomic conditions as most central banks shift towards rate cuts. Investors are urged to closely monitor upcoming economic reports and earnings releases to assess potential market trends.
Equity futures showed little movement on Wednesday, with Wall Street seeking to maintain its September gains. Despite some positive momentum, worries about an economic slowdown remain prevalent, especially following the Fed’s recent rate cut. The futures market now indicates a 60% probability of another 50 basis point cut by November, a notable rise from just 13% a month ago.
After an initial increase, the S&P 500 dipped into negative territory as midday approached, while the Nasdaq struggled to retain its early gains. The Dow Jones finished the day down 0.70%, with the S&P recording a 0.19% loss and the Nasdaq ending flat.
In the cryptocurrency market, Bitcoin (BTC) experienced a sharp pullback of over 2% after reaching $64,000 in earlier trading. “Funding rates shifted from negative to positive, reflecting market uncertainty,” noted analysts at Secure Digital Markets. Traders are currently focused on the $65,000 level, which is crucial for a confirmed breakout.
Data from TradingView showed an early attempt to push Bitcoin above $65,000 faltered at $64,800, leading to a retest of support around $63,000.
On the exchange-traded fund (ETF) front, Bitcoin saw inflows of $136 million this week, primarily from Blackrock, which recorded its largest inflow in over two weeks at $98.9 million. Ethereum (ETH) also saw significant inflows of $62.5 million. Trading volume for Bitcoin ETFs increased by 18%, while Ethereum ETFs saw an 8% rise.
Looking ahead, Deribit has reported that $7.7 billion in Bitcoin and Ethereum options are set to expire this Friday, potentially triggering notable volatility in the crypto markets.
At the time of reporting, Bitcoin was trading at $63,401, down 1.2% over the past 24 hours. While stocks and cryptocurrencies faced challenges, spot gold reached a new record high above $2,670 per ounce on Tuesday before retreating to $2,659, marking a slight gain of 0.10% for the session.
In the crypto community, sentiment is shifting toward bullishness, with a survey from Crypto X indicating that many expect Bitcoin to approach $100,000 in the final quarter of 2024. Analyst Wolf remarked on the clear consolidation pattern Bitcoin has formed over the past six months, suggesting that a bullish phase is imminent.
Market analyst Wick noted a recent reversal bar that could validate a bullish outlook if upward movement continues. Analyst Luke Broyles highlighted that when adjusted for inflation, Bitcoin’s all-time high in 2021 is effectively $83,000, predicting that by the next round of monetary expansion, it could reach $95,000.
Trader Elija Boom suggested that the crypto market may be entering a parabolic phase, signaling the start of a bull market cycle dubbed “Uptober.”
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