Bitcoin’s Acceptance as 'Digital Gold' May Spur Demand From New Investors: Coinbase

Gold has outperformed after the Federal Reserve expressed a cautious stance on the pace of future interest-rate cuts, the report said.

AccessTimeIconApr 5, 2024 at 2:28 p.m. UTC
Updated Apr 5, 2024 at 2:30 p.m. UTC
  • Investor perception of bitcoin as digital gold means the cryptocurrency could attract new demand in the current macroeconomic environment, Coinbase said.
  • The capital unlocked by spot bitcoin ETFs represents the most fundamental shift in market structure since the previous crypto cycle, the report said.
  • Coinbase is still largely positive on the outlook for cryptocurrency markets in the second quarter.

Cryptocurrency markets dropped along with other risk assets after the Federal Reserve reiterated a cautious stance on the pace of future interest-rate cuts. Gold has outperformed, and this may benefit bitcoin (BTC), Coinbase (COIN) said in a research report on Friday.

“Given the market’s recent hawkish views on rate cuts, we think gold’s performance signals an overweighting on inflation relative to Fed rate changes as well as an overall belief that certain inflation bumps could materialize more problematically than anticipated,” the report said.

“Bitcoin’s increased acceptance as a form of ‘digital gold’ could enable demand from a new subset of investors in this regime,” wrote analyst David Han. “As a result, we think dips are likely to be more aggressively bought compared to previous cycles, even as volatility persists during price discovery.”

Among other macroeconomic signals that inflation may not be entirely subdued, the U.S. jobs market continues to surprise to the upside. The economy added 303,000 jobs last month, the government said Friday. That's the strongest headline number since last May and it beat economist forecasts of 200,000 and February’s 270,000 additions.

The cryptocurrency’s wider access to capital following the launch of spot bitcoin exchange-traded funds (ETFs) in the U.S. could result in less volatility, according to the report. The capital unlocked by spot ETFs “perhaps represents the most fundamental shift in market structure between the previous 2020-21 cycle and today,” Coinbase said.

This capital injection, coupled with the bitcoin halving coming later this month and other positive catalysts, makes Coinbase still largely positive on its outlook for crypto markets for the second quarter.

The quadrennial halving is when miner rewards are slashed by 50%, thereby reducing the rate of growth in the supply of bitcoin. The next halving is expected to occur around April 20.

Edited by Sheldon Reback.


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Will Canny is CoinDesk's finance reporter.