Crypto prices soar while stocks falter on first trading day of 2024

Crypto prices started the new year in the green while stocks faltered on the first trading day of 2024.

Bitcoin and ether inched higher Tuesday, extending gains that saw bitcoin surpass $45,000 for the first time since April 2022 on Monday. Bitcoin (BTC) was hovering around $45,400 Tuesday after the open, up close to 3% in 24 hours and 7% over the past five days.

Ether (ETH) gained 1% Tuesday, trading around $2,400 after flirting with the $2,500 level earlier in the week.

Analysts attribute bitcoin’s rally to — perhaps misplaced — optimism that a bitcoin exchange-traded fund will get the green light from the US Securities and Exchange Commission this week.

The securities regulator is accepting rebuttal comments until Jan. 5, and the final deadline for a decision on the ARK/21Shares proposal is Jan. 10, so a decision before then is unlikely. Still, traders wasted no time getting back into the asset class.

“If the SEC nod doesn’t come tomorrow, does that mean BTC prices drop sharply?” Noelle Acheson, author of the “Crypto is Macro Now” newsletter, said. “Maybe — speculation does seem to be getting a bit ahead of itself, and the BTC funding rate (the cost for long positions in perpetual futures, a useful trader sentiment gauge) has climbed sharply over the past week.”

Equities trended lower Tuesday, extending declines that started late last week as investors took profits on 2023 trades. The S&P 500 and Nasdaq Composite indexes lost around 0.7% and 1.6%, respectively, in the first half hour of trading Tuesday.

Analysts upped their forecasts for the S&P 500 in the past few weeks. Goldman Sachs upped its target by 8%, citing decreasing inflation and a pivoting Federal Reserve as the key tailwinds.

“The S&P 500 is starting 2024 trading at a very lofty 19.5x valuation and while I’m not going to say that valuation is unjustified, I will say that valuation makes several key, positive assumptions about critical market influences in the coming year,” Tom Essaye, founder of Sevens Report Research, said. “And how reality matches up with those assumptions will determine whether stocks extend the rally (and the S&P 500 hits new highs and makes a run at 5,000) or gives back much of the Q4 Santa Claus rally.”

Investors are betting big on several key events happening in 2024, Essaye said. Namely a series of rate cuts, no economic slowdown and decreased geopolitical turmoil.

“Events could unfold the way the market currently expects,” Essaye added. “But these assumptions are aggressively optimistic and it is how events unfold versus these expectations and not on an absolute scale that will determine how stocks and bonds trade to start the year.”

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