Bitcoin Left Out as Stocks, Bonds and Gold Party on Global Monetary Easing

As a seasoned crypto investor with a decade of market experience under my belt, I’ve learned to navigate the choppy waters of digital assets with a steady hand and a keen eye for trends. Over the years, I’ve witnessed Bitcoin’s incredible rise from obscurity to become the flagship cryptocurrency we know today. However, this latest development has left me scratching my head a bit.

Suppose the bitcoin enthusiasts learned that Western central banks had initiated a fresh monetary loosening policy. Meanwhile, the S&P 500 and Nasdaq, despite a brief summer scare, were treading near record-breaking heights, U.S. Treasury bonds’ yields were plummeting to their lowest levels in years, and gold prices were skyrocketing to unprecedented peaks. Would this information potentially capture their attention?

As a crypto investor, I find myself pondering over the uncertainty about whether the Federal Reserve will decrease its key lending rate by 25 or 50 basis points in the coming week. Regardless, it’s clear that the U.S. central bank is preparing to initiate its first easing cycle since 2019. This move aligns them with other significant Western central banks such as the European Central Bank, the Bank of England, and the Bank of Canada, all of whom have already reduced interest rates on multiple occasions. Interestingly, Japan has yet to follow suit, but even its benchmark policy rate of 0.25% is just a few basis points above zero, hinting at a potential shift in their monetary policies soon.

In simpler terms, when the planned loosening of monetary policies by developed countries’ central banks started showing effects, traditional investments like stocks, bonds, and gold responded positively and experienced significant increases in value.

Bitcoin’s struggle

Zoom out, said one smart observer CoinDesk talked to, noting even with the major pullback since March, bitcoin remains higher by more than 40% year-to-date and 127% from year-ago levels. Much of bitcoin’s underperformance over the past few months might be nothing more than a breather after an outsized upside move. The crypto’s performance in 2024 and year-over-year remains far ahead of U.S. stocks and gold.

Still, zooming out even further might be frustrating to bulls. After all, bitcoin today is well lower than its level nearly three years ago when it touched what was then a record $69,000. Taking into account the speedy inflation in those three years, the performance looks even worse, particularly if bitcoiners would like the crypto to be known as an inflation hedge. The S&P 500 is higher by about 33% over that time frame and the barbarous relic gold is up more than 50%.

Steno Research pointed out that Bitcoin has undergone very few periods of interest rate reduction, specifically only one which started in 2019. The researchers explained that during the initial Federal Reserve rate cut in August, Bitcoin dropped approximately 15%. By the end of November, when the Fed had reduced rates by 75 basis points, Bitcoin continued to decline. It wasn’t until March 2020, during the significant monetary stimulus triggered by the Covid-19 pandemic, that Bitcoin found a bottom and started an impressive upward trend.

It could be that a modest sequence of interest rate decreases may have minimal impact on Bitcoin’s value, and more drastic, crisis-like actions from central banks would potentially trigger another bull market surge.