Will Ethereum be left behind?
As this chart shows, Ethereum (ETH) – the second-largest cryptocurrency by market cap – underperformed Bitcoin (BTC) in investment returns over the past 12 months. The blue line is BTC and the red line is ETH. (As of 12:00 p.m. EST on October 1, 2024.)
Over the past 12 months, BTC has gained about 122%, while ETH has only gained about 45%. Wait a minute – each are amazing one-year gains. However, ETH has lagged behind comparatively. Here are two explanation why:
- New bull market: Typically, BTC leads in a brand new crypto bull market – just like the one which began in January 2024 – very like major blue-chip stocks lead in a brand new bull marketplace for stocks. Therefore, BTC is currently expected to outperform. There isn’t any obvious reason for ETH investors to panic (at the very least not yet).
- BTC Spot ETFs: In January 2024, the US Securities and Exchange Commission (SEC) approved spot BTC exchange-traded funds (ETFs) for the primary time. This opened the door for institutional investors and huge individual investors within the US to get into cryptocurrencies without buying them directly. While Canada was the primary country to approve BTC and ETH spot ETFs as of 2021, the massive market-moving money is coming from the US. Since BTC ETFs received SEC approval first – followed by ETH ETFs six months later – BTC saw money flowing in additional and sooner in comparison with ETH.
How will rate of interest cuts affect cryptocurrencies?
The US Federal Reserve (Fed) cut rates of interest by 50 basis points in September. And there’ll likely be further cuts. This is important for Bitcoin and crypto.
TLDR: When the Federal Reserve lowers rates of interest, they’re essentially adding dollars to the system by lowering the associated fee of borrowing. The more dollars floating around within the economy, the less each of those dollars is price. As a result, asset prices – including stocks, real estate and cryptocurrencies – are rising.
Think of it this fashion: If the variety of Gucci bags on the planet doubled tomorrow, each of those bags could be price lower than it’s today. In other words, every Gucci bag would have been devalued. It’s the identical with money.
When there’s a variety of money within the economy, people now not wish to hold money due to devaluation. Instead, they like to carry growth stocks like stocks, real estate, gold and – yes, you guessed it – cryptocurrencies. In fact, the devaluation of the US dollar is one in all the strongest arguments for investing in Bitcoin.
The following graphic was shared on x.com (formerly Twitter) on September 16, 2024 by Raoul Pal – creator of the investment newsletter Global Macro Investor. It shows the close connection between the expected global money supply (Global M2 10-week lead) and the worth of BTC.
Federal Reserve rate of interest cuts often lead to a rise in the cash supply. The market is subsequently expecting a rise in the cash supply M2. If the BTC price continues to resemble the movements of the worldwide money supply M2, we could expect a pointy rise in BTC. That’s a giant “if,” though. No chart can predict the long run, so investors mustn’t make decisions based solely on this (or another) chart.
1/ Close, very close.
1/ Global M2 vs. BTC pic.twitter.com/VWxHHYk0ki
– Raoul Pal (@RaoulGMI) September 16, 2024
The evolving regulatory landscape and increasing institutional adoption are positive signs for crypto in Canada. Sure, some exchanges may close on account of stricter regulation, but many more comply with securities laws. This makes crypto investments safer for Canadians.
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