2024-01-05 04:32:06 ET
Everyone has opinions about what the market will do in 2024 – and where to look for the signs. But, for David Buckham (author of The End of Money , Why Banks Fail and The Age of Menace ) answers can be found in a surprising place: the Nasdaq.
The Nasdaq index can even provide some surprising clues as to what is coming for cryptocurrencies in 2024, says Buckham:
There is a very important point that’s lost on people, which is that there’s a very strong correlation between the amount of money invested in cryptocurrency to the value of the stock market, particularly the Nasdaq.”
That amount is also very highly correlated to the size of the Federal Reserve’s balance sheet, which is the other side of the equation as to how much money has been put into the system (which was put in to save the system from collapsing post the financial crisis).”
How much?
Just how much money are we talking here? A lot, according to Buckham – and also a lot more than there used to be.
It used to be $800 billion pre the financial crisis of 2008, and it grew to around $9 trillion in March 2022, because the Fed was performing one round of quantitative easing after another to keep the market happy.”
Let’s put that amount into perspective quickly. This means that, between 2008 and 2022, the United States’ debt increased tenfold.
And let’s not forget that $9 trillion is a large amount of money in itself – almost triple the size of the entire GDP of India, the world’s fastest-growing economy in 2023.
Cryptos and stocks: the Nasdaq connection
Okay, but what has this got to do with cryptocurrencies and the stock market?
Well, according to Buckham, the amount of money in the Nasdaq is directly correlated to the amount of money funneling into cryptocurrencies – which can be famously opaque and hard to read – especially Bitcoin.
That’s because what happens (when there’s quantitative easing) is that the Fed prints enormous amounts of money by buying bonds and mortgage-backed securities in the open market, therefore taking that money out of the market. And this money has to go somewhere, so it flows into cryptos, stocks and especially the so-called ‘magnificent seven’ companies (namely Apple, Microsoft, Nvidia, Tesla, Alphabet, Amazon and Meta Platforms).”
So, when investing into the Nasdaq is high… so is investing in cryptos.
So where is the Nasdaq currently?
The Nasdaq composite index ended 2023 having made gains of more than 40 percent in the year, closing at a price of $15,011.35 on December 29 th . Comparatively, the year before that, the Nasdaq Composite closed out 2022 at a level of $10,466.48 on December 30 th 2022.
This is a YoY increase of over 30 percent (almost $5,000) for the Nasdaq Composite alone.
Meanwhile, the market cap of Nasdaq Inc (owner of the Nasdaq stock exchange) has been hovering at between $33.5 billion and $32.3 billion, up significantly from its market cap of $30.2 billion on January 2 nd 2023.
Read more: What David Buckham has to say about rate hikes in 2024
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