In recent days, both Bitcoin and gold have seen significant price increases. According to market analysts, the reasons behind this rise include growing global liquidity, central bank balance sheet expansions, and the Federal Reserve’s recent interest rate cuts. Over the past five days, Bitcoin has surged 7%, surpassing $64,000 for the first time since August, while gold reached a new record high of $2,600 per ounce.
Factors Behind the Rise of Bitcoin and Gold
Charlie Bilello, Chief Market Strategist at Creative Planning, noted that for the first time since Bitcoin’s creation in 2009, both Bitcoin and gold are among the best-performing assets of the year.
Analyst James Van Straten attributes this outperformance to several factors, including the expansion of global central bank balance sheets and the Federal Reserve’s decision to cut interest rates by 50 basis points in an effort to stimulate investment and economic activity. Although the Federal Reserve’s current balance sheet stands at $7.1 trillion, quantitative tightening has slowed, and the reduction in reverse repurchase balances, which now sit slightly above $300 billion, has provided liquidity to the financial system, encouraging lending, investment, and overall economic growth.
Globally, the total balance sheets of the world’s 15 largest central banks, including the U.S., European Union, Japan, and China, have surged to around $31 trillion. This trend, which has been climbing since July, reflects a recovery in global liquidity that has particularly benefited Bitcoin, a cryptocurrency closely tied to liquidity trends.
With lower interest rates encouraging investment in riskier and alternative assets, the Federal Reserve’s rate cut has further strengthened both Bitcoin and gold. Analysts agree that increasing liquidity and stimulus measures have helped both assets reach new highs, solidifying their roles as the top-performing assets in the current economic environment.
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Bitcoin, gold, liquidity, Federal Reserve, central bank balance sheet
