Bitcoin hits all-time high as USD on track for worst year since 1973: Analyst

Precious metals, Bitcoin, and risk assets like the S&P 500 are simultaneously reaching new all-time highs, with BTC surpassing $125,000 and gold nearing $4,000 per ounce, while the S&P 500 is up over 40% in six months. This unusual correlation, highlighted by a 0.91 coefficient between gold and the S&P 500, signals a "generational" macroeconomic shift and the market pricing in "new monetary policy," according to The Kobeissi Letter. This trend is occurring as the US dollar faces its worst year since 1973, driven by Federal Reserve rate cuts amid rebounding inflation, a weakening labor market, and increased investor interest in alternative assets like Bitcoin due to US government dysfunction and eroding dollar value.

Analysis

Precious metals and Bitcoin (BTC) are rising to new all-time highs, alongside risk assets like stocks, as the US dollar (USD) is on track for its worst year since 1973, signaling a “generational” macroeconomic shift, according to market analysts at The Kobeissi Letter. The S&P 500 stock market index is up over 40% in the last six months, BTC hit a new all-time high of over $125,000 on Saturday, and gold is also trading at all-time highs — $3,880 per ounce at the time of this writing — nearing $4,000, Kobeissi Letter wrote. “The correlation coefficient between gold and the S&P 500 reached a record 0.91 in 2024,” the analysts wrote, adding that this unusual correlation between safe-haven assets and risk assets indicates that markets are now pricing in a “new monetary policy,” Kobeissi added: “There is a widespread rush into assets happening right now. As inflation rebounds and the labor market weakens, the Federal Reserve is cutting rates. The USD is now on track for its worst year since 1973, down over 10% year-to-date. The USD has lost 40% of its purchasing power since 2000.” The analysis came amid a US government shutdown, massive downward revisions of US jobs numbers that signal a weakening labor market, interest rate cuts, and growing concern over the eroding value of the dollar, which are all positive price catalysts for BTC. Related: Bitcoin corrects from $125K all-time high: Where will BTC price bottom? Analysts agree new BTC all-time high is fueled by macroeconomic factors BTC’s rally to a new all-time high was driven by macroeconomic factors, including the recent US government shutdown, according to Fabian Dori, chief investment officer at global digital asset bank Sygnum. The US government shutdown that began on Wednesday closed down operations at regulatory agencies and bureaucracies entirely or forced them to operate on a bare bones budget and minimal staff. The “political dysfunction” stemming from the shutdown has renewed investor interest in BTC as a store-of-value monetary technology, as faith in traditional institutions falters, Dori told Cointelegraph. Magazine: Scottie Pippen says Michael Saylor warned him about Satoshi chatter A significant macroeconomic shift appears to be underway, characterized by a highly unusual, simultaneous rally in both risk assets and traditional safe havens. The S&P 500 has surged over 40% in the last six months while Bitcoin (BTC) and gold have reached new all-time highs of over $125,000 and $3,880 per ounce, respectively. This synchronized movement is underscored by a record 0.91 correlation coefficient between gold and the S&P 500 in 2024, suggesting a broad-based flight into all asset classes. According to market analysts, this trend is primarily driven by a sharp decline in the US dollar, which is on track for its worst performance since 1973 after losing over 10% year-to-date and 40% of its purchasing power since 2000. The Federal Reserve's policy of cutting interest rates, despite rebounding inflation and a weakening labor market, is fueling this asset inflation. Further contributing to this dynamic is perceived political dysfunction, such as the recent US government shutdown, which is reportedly eroding investor faith in traditional institutions and increasing the appeal of alternative stores of value like Bitcoin.

Key Decisions for Investors

• Given the broad-based asset rally driven by a weakening US dollar, investors should evaluate allocations to real assets like gold and digital assets like Bitcoin as potential hedges against further currency debasement.
• The record-high correlation between equities and gold suggests traditional diversification is currently ineffective; monitor this metric closely, as a reversion to historical norms could signal an abrupt end to the 'everything rally' and a sharp market repricing.
• While Federal Reserve rate cuts are fueling market gains, the backdrop of rising inflation and a weakening labor market presents a material stagflation risk that could challenge the sustainability of the current rally in risk assets.