Why Markets Are Growing Up, But Not Bitcoin

The cryptocurrency market keeps drifting within narrow ranges, except for some altcoins. BTC/USD has consolidated in the $ 9000-9500 area, and neither buyers nor sellers have been able to get out of this corridor yet.

At the same time, the activity in the classical financial markets is much more vigorous. Risky instruments: currencies, stocks and stock indices are breaking new volatility records. In percentage terms, the range of movement may not be so wide, but unlike Bitcoin, we can at least see a clear trend (the uptrend).

Optimism has been dominating the markets throughout the week. As a result, many assets skyrocketed to their all-time highs. The main driver for this bullish rally in risky instruments were the results of the EU summit. By the end of the five-day marathon summit, EU leaders agreed on a €750 billion recovery package to help countries get over an unprecedented economic downturn caused by the coronavirus pandemic. The recovery fund will be composed of €390 billion in grants and €360 billion in loans. Thanks to grants, countries like Italy, Spain and Greece will be able to increase spending without fearing that their large public debt will climb to unacceptable levels.

While the agreement has yet to be ratified, which may also turn out to be problematic, it is still an important step for the EU towards a more integrated fiscal union. Welcoming the deal, some economists recalled Alexander Hamilton, the first US Treasury Secretary who proposed the national government to take over and pay off the state debts. Taking into account the market's reaction to new measures to support the European economy, we can conclude that traders once again became confident that money can solve any problem.

Amid the recovery of risky assets, gold showed even bigger growth, updating its 9-year highs at $ 1850 per ounce. Gold buying frenzy in the current conditions indicates that market is concerned about the excessive liquidity inflow, which could spur inflation growth. Gold is a traditional safe-haven in this case. As for digital currencies, Bitcoin shares similar functions. Experts have repeatedly emphasized that there is a strong correlation between traditional gold and BTC, which manifests itself with a small time lag. For this reason, the current demand for gold should be best interpreted as a hedge against the risk of impending global inflation. We shouldn’t forget that some large investors prefer not to display their capital by investing in exchange-traded funds. In this case, Bitcoin is the best alternative. With that said, we recommend fastening your seat belts for a bullish rally in BTC/USD with the upside potential above $ 12,500.