FameEX Hot Topics | Bitcoin and Altcoins Underperform as Gold and Stocks

New research from on-chain analytics platform CryptoQuant offers insight into why Bitcoin and altcoins have been underperforming recently, citing four key factors: Federal Reserve rate cuts, stablecoin reserves, leveraged traders, and historical market patterns. Despite Bitcoin’s stagnation, both gold and US stock markets continue to hit all-time highs, raising questions about crypto’s place in the mainstream asset class.

CryptoQuant contributor XWIN Research Japan suggests that the current market dynamics are simply following historical trends. They argue that during the early stages of rate cuts, institutional capital typically flows into high-liquidity assets like equities and gold, with crypto, especially altcoins, only benefiting when risk appetite expands. This means Bitcoin and altcoins are lagging behind the broader markets, waiting for liquidity to trickle down to riskier assets.

XWIN compares the current market behavior of Bitcoin and Ethereum to similar conditions from the previous year. They note a clear pattern: after the Fed’s initial rate cut, a front-run rally occurred, followed by a correction as liquidity didn’t fully shift into crypto. However, once traditional assets cooled down, both Bitcoin and Ethereum outperformed. This pattern is expected to repeat in 2024, with crypto catching up after the broader markets have settled.

Another factor influencing the delay in Bitcoin and altcoin growth is stablecoin reserves. The overall stablecoin supply reached a record $308 billion this month. However, more stablecoins are leaving exchanges than entering, suggesting that traders are taking a risk-off or profit-taking stance. This indicates that liquidity is being parked off-exchange or used in private markets rather than being actively deployed to purchase Bitcoin or Ethereum.

Finally, CryptoQuant notes that traders on derivatives platforms are favoring hedging and leverage strategies, a typical response to sideways market conditions. This behavior further delays accumulation in the crypto space. XWIN concludes that Bitcoin’s historical trend of lagging behind equities before experiencing a surge is likely to repeat, with BTC historically gaining +12% in 30 days and +35% in 90 days following equity all-time highs.

In conclusion, while short-term challenges such as quantitative tightening (QT), Treasury liquidity absorption, and options expiry remain, the structural setup favors a crypto rebound once liquidity cycles catch up. The upcoming $22.6 billion options expiry this Friday could be a crucial event, potentially impacting prices in the near term.

Disclaimer: The information provided in this section is for reference only and does not represent any investment advice or the official views of FameEX.