The market correlation between US stocks and crypto has grown in the past few weeks and is now topping 0.67.
The correlation between cryptocurrencies and US stocks is one for the record. A recent correlation study has shown that both ecosystems are moving in tandem, suggesting that the macroeconomic variables driving equities are also responsible for shaping the crypto market.
US Federal Reserve Interest Cut Impact on Crypto and Stock
To put this in perspective, the largest 100 crypto assets and the S&P 500 Index have a 40-day correlation coefficient gauge of about 0.67. Noteworthy, this level was only exceeded in Q2, 2022, when it topped 0.72, based on the data compiled by Bloomberg. When a reading hits 1, it indicates that assets are in perfect correlation, and a reading of minus 1 signals the opposite.
The past week was filled with excitement, both in the traditional financial market and in Decentralized Finance (DeFi). At the Federal Open Market Committee (FOMC) meeting on September 18, the US Federal Reserve introduced a 50-basis-point rate cut.
In reaction to the news, Bitcoin BTC $111 822 24h volatility: 3.0% Market cap: $2.23 T Vol. 24h: $65.12 B price surged past $64,000, although it is currently trading at $63,518.59, with a 0.84% increase in the last 24 hours. Similarly, the news of the monetary easing caused several US stock prices to hit new peaks. Previously, most of these stocks were reeling in losses, especially after the first US presidential debate between Kamala Harris and Donald Trump.
Just about one week before the Fed announcement, these stocks began to register some growth. Shares of crypto exchange Coinbase Global Inc. (NASDAQ: COIN) rebounded by 5.3% while returning to their pre-debate price of $157.
Also, MicroStrategy Inc (NASDAQ: MSTR) saw its share price slip under $125 earlier but later surged to $129.
More Economic Data Could Push BTC Above $71K
This recent development underscores the relationship between US economic data and the market outlook. Traders can catch a glimpse of the possible extent and pace of future cuts in placing a benchmark on borrowing costs. Speaking about the situation of the market, Caroline Mauron, the co-founder of Orbit Markets, a provider of liquidity for trading in digital-asset derivatives, highlighted that:
“Macro factors are driving crypto prices currently, and this should continue throughout the Fed’s easing cycle, unless we see a crypto-specific black swan event.”
This new week will herald the release of new economic data, including commentary from Fed officials. The central bank’s preferred measure of inflation is the Personal Consumption Expenditures (PCE) price index. As a result, more positive momentum may be driven onto both the TradFi and DeFi markets.
Some experts believe BTC is on the verge of a major bullish uproar after being trapped in consolidation in the past six months. At a significant resistance level of about $64,200 from earlier on Monday, the BTC price has coincided with the 200-day Moving Average (MA). Hence, a consistent close above the 200-day MA and $64,000 level in the coming weeks might guarantee a rally above $71,000.
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