Digital Assets and US Stocks Moving in Tandem
Recent studies reveal that cryptocurrencies and US stocks are showing a strong correlation, indicating that the same macroeconomic factors influencing stock prices are also affecting the crypto market. The 40-day correlation coefficient between the top 100 digital assets and the S&P 500 Index stands at approximately 0.67. This level is only slightly lower than the peak of 0.72 recorded in the second quarter of 2022, according to data from Bloomberg. A coefficient of 1 indicates assets move together, while -1 indicates they move in opposite directions.
Impact of Federal Reserve Decisions
US stocks recently reached all-time highs, and Bitcoin surged past $64,000 last week. This followed the Federal Reserve’s significant decision to reduce interest rates by 50 basis points, marking the beginning of an anticipated cycle of monetary easing. Traders across all markets are closely watching upcoming US economic data for insights on the potential direction and pace of further interest rate cuts.
“Macro factors are currently driving crypto prices,” said Caroline Mauron, co-founder of Orbit Markets, a digital asset trading platform. “This trend is likely to continue throughout the Fed’s easing cycle, unless an unexpected event specifically impacts the crypto market.”
Key Focus on Fed Commentary and Inflation Data
This week, attention will be on comments from Federal Reserve officials and the release of the personal consumption expenditures price index, the Fed’s preferred inflation measure.
Sean McNulty, director of trading at Arbelos Markets, stated, “We believe the insights from Fed speakers are more crucial than the PCE inflation data right now. The market is trying to gauge how the FOMC will respond.”
Bitcoin and Market Sentiment
As of 6 a.m. Monday in London, Bitcoin, the largest cryptocurrency, saw a slight increase of about 1%, reaching $63,930. This rise coincided with modest gains in US equity futures.
Additionally, Vice President Kamala Harris’s commitment to promoting investment in artificial intelligence and cryptocurrency, if elected, has bolstered market sentiment. Expectations of further stimulus in China, following a recent cut in borrowing costs, have also contributed to a positive outlook.
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