Bullish sentiment returns as stocks and cryptos climb higher, gold hits new ATH

NEW YORK (September 12) Asset prices trended higher on Thursday as the latest inflation and labor data further supported expectations that the Federal Reserve will start to lower interest rates next week after spending more than a year at their highest levels in over a decade. 

The U.S. Producer Price Index (PPI) report for August showed wholesale prices rose at a rate of 0.2% month over month, slightly higher than economists anticipated, while the annual rise of 1.7% fell in line with expectations. 

It is now widely expected that the Fed will announce a 25 bps cut on Wednesday, though some are still holding out hope for a 50 bps cut, which the CME FedWatch Tool gives a 31% chance of happening, up from 14% yesterday. 

After trading flat for much of the morning, stocks started to trend higher near midday and managed to keep the momentum going into the close. When it was all said and done, the S&P, Dow, and Nasdaq all finished in the green, up 0.75%, 0.58%, and 1.00%, respectively.

Gold was the big story of the day, with spot gold surging 1.91% on the session to hit a new record high just below $2,560 per ounce.  

Data provided by TradingView shows that Bitcoin (BTC) spiked above $58,000 in early trading on Thursday, and after sliding to a low of $57,310 near midday, bulls managed to rally back above $58,000 in the afternoon and look primed to challenge resisance at $59,000.

BTC/USD Chart by TradingView

“Over the past 24 hours, Bitcoin has rebounded from the $56,600 support level,” noted analysts at Secure Digital Markets. “This movement aligns with a bullish crossover observed on the 4-hour chart, where the 20-day and 50-day Exponential Moving Averages (EMAs) intersected. Additionally, oscillators in the same timeframe show bullish divergence, signaling a potential short-term upward reversal.” 

“While technical indicators offer insight into price trends, they are not sufficient on their own to predict future movements with certainty,” the analysts noted. “It remains to be seen if this bounce will propel Bitcoin past the $60,000 mark and towards the upper end of the six-month trading range.”

At the time of writing, Bitcoin trades at $58,182, an increase of 1.09% on the 24-hour chart. 

Expect volatility

“We’ve had both the CPI and PPI inflation numbers this week, and both paint a similar picture,” said market analyst Bloodgood. “The Year-over-Year (YoY) CPI came in at 2.5%, a bit below estimates of 2.6%, while the Month-over-Month (MoM) was 0.2%, in line with expectations. As for the PPI, it was 1.7% YoY, below expectations of 1.8%, with the MoM reading at 0.2%, slightly higher than the expected 0.1% increase.”

“Given these numbers – which are reassuring but not too different from the forecasts – it’s not a surprise that almost everyone is expecting a 25 bps cut for the Fed meeting on Wednesday,” he said. “All in all, it looks like we’re about to enter a fairly orderly cutting cycle, which should be very good for risk-on assets.”

Bloodgood noted that from a historical perspective, rate cuts “tend to come with some initial downside volatility, but that should be dampened given that the elections are right around the corner. Barring some really unexpected economic developments, the macro picture for Q4 remains bullish in fundamental terms.”

Regarding Bitcoin, Bloodgood noted that it fell towards $50,000 since last week, but bulls stepped in to “save the day,” as, this time, “the pullback wasn’t as quick as it was in early August, indicating that bears are getting exhausted.”

“At the time of writing, BTC is sitting below the breakdown area, which is a key point for the near future trend,” he said. “Breaking above this level would lead to higher levels quickly, while a rejection would make $50k a very likely target in the next few weeks.”

“Keep in mind that the structure remains bearish in terms of TA, so I’m not getting my hopes up until a lower high is broken,” Bloodgood concluded. 

According to TradingView analyst TradingShot, a rate cut will lead to an increase in the global money supply, which could be the thing needed to kick off the next leg higher for Bitcoin. 

“As the Fed prepares for the first rate cut next week since it begun the cycle of hikes in February 2022, it would be very eye-opening to observe the global monetary supply and what more money in circulation could mean for Bitcoin,” TradingShot said. 

“The light green and red candles (top) illustrate the Global Liquidity Index (GLI) comprising of the FED, TGA, RRP, ECB, PBC, BOJ, BOE and other Central Banks,” he noted. “It tracks and measures exactly what it says, the liquidity/monetary supply/money in circulation around world economies.” 

“When central banks cut rates, they essentially print more money, flooding the system with cash that devalues the currency already in circulation. When that happens, it is easier for corporations and/or individuals to access more money through loans etc, thus increasing their spending/ buying/ investing capacity,” TradingShot said. “Principally, this means that it is easier for investors to buy riskier assets, which leads to value increases. In that category fall stocks and cryptocurrency.”

“As this chart shows, it is no surprise that every time the GLI starts rising, Bitcoin (candles at the bottom) rallies,” he observed. “More specifically, when Liquidity drops and flattens, it creates BTC's Bear Cycle, and when it breaks above its Resistance, BTC starts the rally phase of its Bull Cycle.”

TradingShot said that following the “dramatic FED rate hikes that brought us back to pre-2008 Housing Crisis levels, the GLI experienced a stronger drop, and instead of flattening, it created a Wedge with Lower Highs as its Resistance.”

“GLI is now exactly on this Lower Highs trend-line and if broken, we might have a break-out similar to the Resistance break-outs of the previous Cycles, thus initiating the Parabolic Rally on Bitcoin,” he concluded. 

Traders wade back into the altcoin market

A majority of tokens in the top 200 recorded gains on Thursday as traders have started to slowly increase their exposure ahead of next week’s rate cut. 

Daily cryptocurrency market performance. Source: Coin360

Worldcoin (WLD) was the biggest gainer, increasing 14.6%, followed by gains of 14.3% for Trust Wallet Token (TWT) and 13.9% for Sui (SUI). GMT (GMT) was the biggest loser, falling 6.2%, while SuperVerse lost 5%, and ConstitutionDAO (PEOPLE) fell 4.3%. 

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