The dramatic movement of silver prices has become the center of attention this week as it surged in a parabolic manner, setting a new historical peak above 64 USD.
Behind this impressive performance, there may be many noteworthy factors, as some experts suggest that this could be a precursor to a strong upcoming growth in the cryptocurrency market.
Many astute analysts have pointed out that, in the recent past, the price movements of Bitcoin tend to closely follow the price of silver but with a certain delay. The correlation between silver and Bitcoin has been recorded since 2021.
The price of Bitcoin (BTC USD) has behaved similarly to silver prices but a bit slower | source: TradingView
If history repeats itself, it is likely that Bitcoin will enter a bullish cycle in response to the rise of silver. However, this delay may last from a few weeks to a few months before actually affecting BTC's price.
This surge in silver prices also shows that liquidity is shifting away from gold. This could be a signal that money will continue to flow into other currently undervalued assets.
Why are silver and gold rising sharply, while Bitcoin is left behind?
Investors had hoped that the latest interest rate cut announcement from the U.S. Federal Reserve (FED) along with the end of quantitative tightening (QT) would drive growth in riskier assets. However, the reality turned out to be the opposite, showing that the market is being influenced by other factors.
After the FED meeting, the price of Bitcoin dropped by more than 4%, while silver and gold continued to rise sharply. A key reason for this development is concerns about stagflation.
The FED decided to cut interest rates in the context of high inflation, while fears of stagflation are also increasing.
This makes investors wary, unwilling to invest in riskier assets like Bitcoin and other cryptocurrencies. Conversely, the trend of prioritizing safe-haven assets has helped the prices of gold and silver rise sharply in recent times.
The shift of money flow between these asset groups also opens up possibilities, as liquidity withdraws from gold and silver, it will seek Bitcoin and other cryptocurrencies.
Moreover, experts are still debating whether the stagflation environment will have a positive or negative impact on Bitcoin. The answer to this question largely depends on the state of the global monetary system, which is fraught with risks due to a major factor.
The upcoming meeting of the Bank of Japan: A key factor determining global liquidity
It is undeniable that the macroeconomic context has significantly affected Bitcoin prices and the cryptocurrency market recently. This trend is likely to continue, especially as the Bank of Japan (BOJ) remains a key player.
In the first week of August 2024, the cryptocurrency market witnessed a sharp decline due to trading activities related to interest rate differentials with the Japanese Yen after the BOJ raised interest rates.
According to the latest reports, the BOJ is considering continuing to raise interest rates, which could lead to further reversals of interest rate differential trades.
The Bank of Japan (BOJ) is rumored to be considering raising interest rates further | Source: X, Bull Theory
Global liquidity is currently closely tied to the Japanese Yen, while Japan is also one of the countries holding the most U.S. government bonds.
If Japan raises interest rates and continues to sell U.S. bonds, the global financial market may enter a new period of strong volatility.
This scenario is likely to cause money to flow out of riskier assets like Bitcoin and other cryptocurrencies.
Analysts believe that the upcoming meeting of the BOJ is the underlying cause of the recent decline in the cryptocurrency market after the FED announced interest rate cuts.
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