According to a correlation study, digital assets are now more closely aligned with the performance of U.S. stocks than at almost any other time in the past, indicating that macroeconomic variables driving the stock market are also impacting the cryptocurrency market.
Data compiled by Bloomberg shows that the 40-day correlation coefficient between the top 100 digital assets and the S&P 500 Index is approximately 0.67, close to the peak of 0.72 reached in the second quarter of 2022. A correlation coefficient of 1 indicates complete synchronization of asset movements, while -1 indicates a complete inverse relationship.
Source: Bloomberg
Last week, the U.S. Federal Reserve aggressively cut interest rates by 50 basis points, marking the beginning of the anticipated monetary easing cycle, resulting in historic highs for U.S. stocks and Bitcoin breaking through $64,000.
For traders of various types, the upcoming U.S. economic data is now critical, as they can look for clues regarding the magnitude and speed of potential further cuts to benchmark borrowing costs. Caroline Mauron, co-founder of digital asset derivatives trading liquidity provider Orbit Markets, stated:
“This week’s focus is on comments from Fed officials and the release of the central bank’s preferred inflation measure—the Personal Consumption Expenditures Price Index (PCE Index).” Sean McNulty, trading head at liquidity provider Arbelos Markets, added:
Source: Bloomberg