On September 18th, the Fed made an unexpected decision.
It cut interest rates by 50 basis points.
Gold immediately surged to new all-time highs.
This is because investors saw the rate cut as a sign of potential future inflation or currency debasement.
Gold Hit New Highs
The S&P 500 also broke to new highs following the rate cut.
…but, interestingly, Bitcoin has been unable to keep up with the S&P 500 and gold’s breakout.
Bitcoin is:
- Trending down consistently since March 2024.
- Still about 15% below its previous all-time high.
This divergence between Bitcoin and the S&P 500 isn’t unprecedented.
We’ve seen this multiple times over the last 5 years… either:
- Bitcoin catches up to the S&P 500.
- The S&P 500 catches down to Bitcoin.
So, which one is most likely to occur today?
The US Dollar: A Key Driver
To understand Bitcoin’s price, we need to look at the US Dollar Index (DXY):
- Measures the strength of the USD relative to other major global currencies.
- Has a massive impact on financial markets, including Bitcoin.
Historically, significant declines in DXY have coincided with big rallies in Bitcoin.
Why?
A weaker USD makes Bitcoin more affordable for foreign investors.
This drives up demand and price.
The Mechanics of Dollar Weakness and Bitcoin
Let’s break this down with an example:
- Imagine Bitcoin is priced at $60,000 on crypto exchanges.
- The US dollar suddenly weakens by 5%.
- That same $60,000 Bitcoin becomes 5% more affordable for foreign investors.
This increased affordability can trigger a big influx of capital into Bitcoin.
Current Market Dynamics
Recently, the DXY has weakened.
If we compare it with US interest rates, there’s a positive correlation.
So, as the Fed cuts rates, we’re likely to see more pressure on the dollar.
This could be a boost for Bitcoin.
Our Bitcoin Valuation Model
Our quant model, which uses the US dollar and S&P 500 to find Bitcoin’s fair value, is showing some interesting results:
- Bitcoin should be up around 100% over the last 6 months
- Actual performance: Roughly flat
- Current model suggests Bitcoin is undervalued by around 50%
This isn’t the first time our model has shown Bitcoin to be undervalued.
Similar situations occurred in:
- January 2023
- September 2020
- January 2019
All of these instances proved to be fantastic buying opportunities for Bitcoin.
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Bitcoin’s Seasonality Favors Upside Soon
Bitcoin’s price action often follows a seasonal pattern:
- May to September: Typically trends lower
- October to year-end: Generally trends higher
While we might see some volatility in the coming weeks, we’re optimistic on Bitcoin heading into the end of 2024.
That’s why we recently sent out a buy alert to our clients for Bitcoin.
Our Track Record Speaks for Itself
We’ve had numerous successful crypto trades:
- Profits of 30%, 50%, and even 80%
- Kept our losses very small despite crypto volatility.
View our 2024 track record for free here.
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Big Announcement: We’re Rebranding!
We have exciting news to share. We’re undergoing a branding change!
Mark your calendars: On September 30th, Game of Trades becomes Bravos Research.
Stay tuned for our fresh look and continued market-beating insights!
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Read more: This Is the Final Rally…
