Bitcoin Isn’t at a Record Like Gold and S&P 500, but an Overlooked Catalyst Suggests a Coming Change

As a seasoned analyst with over two decades of market analysis under my belt, I find myself intrigued by this current state of play. The gold rush and S&P 500’s record-breaking climb are nothing new, but Bitcoin’s performance is capturing my attention. Despite its 8% rally this week, it remains below its all-time high.

This week, Bitcoin (BTC) has surged by 8%, outshining both gold and the S&P 500 in performance. However, it remains under its peak value, whereas gold and the S&P 500 have reached fresh record highs each.

As of now, gold stands at approximately $2,718 and has increased by around 32% this year, making it on track for its strongest annual performance since 2010, where it gained 38%. In contrast, the S&P 500 is currently up about 23% in 2024. Despite a seven-month streak of sideways or falling prices, bitcoin still outperforms with an over 50% growth this year.

Why no new record for bitcoin?

As an analyst, I find it plausible that bitcoin’s relatively subdued performance since reaching an all-time high of over $73,700 in March could be attributed to the “too far, too fast” phenomenon. In the preceding period, the global crypto leader had witnessed a staggering near five-fold increase from where it stood 14 months prior. This growth was particularly pronounced during the initial 10 weeks of 2024, with nearly a doubling in value within that timeframe.

Over the summer, there was an additional factor adding to the selling pressure – the German government liquidating a significant amount of confiscated Bitcoin, and the Mt Gox trustee distributing Bitcoin tokens back to their rightful owners, causing a surge in supply.

Additionally, it’s worth noting that Bitcoin is constantly traded around the clock, which means it carries significantly higher risk of leverage and volatility compared to other financial instruments. Consequently, this increased volatility could potentially trigger more liquidation events, causing the price to drop below its actual value.

Over the summer, a considerable shift in Bitcoin’s distribution occurred, causing its price to decrease as indicated by the intense red shading.

Moving forward, it seems there’s a trend of buildup involving various groups. These groups are often referred to as “shrimps” (those with fewer than one Bitcoin) and “whales” (those holding between 1,000 and 10,000 tokens). Over the past month, as indicated by Glassnode data, these groups have been actively buying, which is signified by the deep blue coloring.

Outlook: all-time highs on the horizon

Given that more interest rate reductions are anticipated from leading banks in the West, and the surge in support for cryptocurrency-friendly Republican presidential candidate Donald Trump as well as the significant increase in investments into Bitcoin Spot Exchange Traded Products (ETPs), it appears that breaking another record is a strong likelihood.

One overlooked positive catalyst, though, might be the renewed weakening trend in the Japanese yen.

On Friday, Japan disclosed new figures revealing an annual headline inflation rate of 2.5%, which is the lowest since April and a 0.5% decrease compared to the previous month. Even core inflation showed a significant decline. This news could suggest that the Bank of Japan might hold back on any additional interest rate increases. As a crypto investor, I find this development intriguing as it may affect global financial markets and impact my investment strategies.

Recall that in early August, a tiny BOJ rate hike sent the yen soaring and global markets – bitcoin among them – crashing for a period of a few days. The yen, however, peaked in mid-September at about 140 to the U.S. dollar and has been weakening since. Following the inflation news Friday, it weakened to 150 to the greenback, its weakest level since that early August panic.

In simpler terms, Bob Elliott, Chief Investment Officer at Unlimited Funds, stated that Japan isn’t currently grappling with high inflation rates and there’s not much pressure to tighten monetary policies. He pointed out that the rate of increase in service prices has practically dropped to zero recently, while Japan’s GDP (Gross Domestic Product) has been negative for the year 2024.

To grasp the diminishing strength of the Japanese yen (JPY), it might be helpful to examine its performance relative to other significant currencies, including bitcoin, gold, the U.S. dollar (USD), Euro (EUR), British pound (GBP), Canadian dollar (CAD), and Australian dollar (AUD).

Over the past five years, Bitcoin has increased more than 1,000% compared to the Yen, but not as much when measured against other currencies. A similar trend is observed with gold, which has risen by approximately 150% versus the yen and between 80% and 90% versus other major currencies.