Bitcoin Price Rises Above $42,000 On Rate Cut Bets

(CTN News) – Bitcoin experienced a significant surge in its price, reaching its highest point in almost 20 months. This coincided with gold reaching an all-time peak on Monday, as investors speculated that interest rates would decrease in the coming year.

The cryptocurrency’s value surpassed $42,000, driven by the belief that the industry has overcome its most severe regulatory penalties. However, it later retreated to $41,662, still showing a 7.4 percent increase from the previous day.

Meanwhile, gold witnessed a rally of up to 3 percent, reaching $2,135 per troy ounce, setting a new record. Subsequently, it declined to $2,025 per troy ounce, as reported by LSEG data.

The movements result from a recent surge in investments in stocks and bonds, driven by the belief that the Federal Reserve will soon lower interest rates, despite Chair Jay Powell’s statement on Friday that it is too early to conclude that the central bank has successfully tackled inflation.

According to Luca Paolini, the chief strategist at Pictet Asset Management, there is a striking similarity in the evolution of Bitcoin and gold. He states that all asset classes that typically perform well when the Fed aggressively cuts rates are currently performing well.

Traders are speculating that the first-rate cut could occur as early as March, following a significant decrease in government and corporate borrowing costs.

This has led to a substantial rally in US Bitcoin bond markets, marking the largest monthly rally in almost forty years, specifically in November.

Investors find other assets more appealing due to lower ultra-safe US Treasury debt yields. Despite a 0.6% dip midway through Monday’s session, the S&P 500 index closed at its highest level since March 2022 last week.

The recent US economic data has been strong, even with falling inflation, which has further boosted risky assets such as stocks. HSBC’s chief multi-asset strategist, Max Kettner, described the current market as an “everyone-is-happy-Goldilocks rally” across virtually all asset classes.

Additionally, the growing interest among investors after the closure of two high-profile criminal cases has driven the momentum to buy Bitcoin, whose value has risen by over 20% in the past month.

Sam Bankman-Fried, the former CEO of FTX, and Binance, the world’s largest cryptocurrency exchange, were successfully prosecuted by the US last month.

Bankman-Fried was found guilty of fraud, while Binance paid $4.3bn in penalties after pleading guilty to criminal charges related to money laundering and financial sanctions breaches. However, contrary to the concerns of many traders, Binance was not shut down by US authorities.

Nevertheless, Binance is still Bitcoin facing a lawsuit from the Securities and Exchange Commission for allegedly violating securities laws.

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