According to Coinbase’s latest research, the relationship between cryptocurrencies and the stock market is becoming more pronounced. This interaction is approximately 50% as of September 2024, mainly due to the global monetary easing policies of major countries such as the United States and China. This research has important implications, especially for investors seeking to negotiate these intertwined markets.
Impact of monetary policy
The development of this relationship has been largely influenced by the Federal Reserve’s aggressive approach to lowering interest rates. Bitcoin and crypto stocks have seen significant gains following the recent 50 basis point drop in interest rates.
Bitcoin has surpassed the $64,000 level, and stocks like MicroStrategy and Coinbase are also gaining momentum. This synchronization suggests that both asset types respond positively when the Federal Reserve implements policies aimed at promoting economic development.
Source: Coinbase
Interestingly, Bloomberg data suggests that US stock futures prices are moving in tandem with crypto prices. For example, as the price of Bitcoin rose, many US stocks also hit new all-time highs.
This joint movement suggests a deeper correlation between how investors assess risk in both markets. Orbit Markets co-founder Caroline Moron said macroeconomic factors are currently pushing crypto prices higher, and this trend is likely to continue throughout the Fed’s easing cycle.
Currently, the market capitalization of virtual currencies has reached $2.2 billion. Chart: TradingView
Cryptocurrency: Changing market dynamics
In the past, cryptocurrencies functioned independently of traditional financial markets. Nevertheless, as these digital assets mature, they have become increasingly sensitive to macroeconomic conditions.
This trend is also evidenced by Coinbase research, which shows that Ethereum outperformed Bitcoin during this period of increased correlation. Ethereum’s 8% rise versus Bitcoin in the week following the Fed’s announcement suggests that investor interest in altcoins may be shifting.
Source: Coinbase
Although Ethereum’s performance has improved, investors remain concerned about recent sales by the Ethereum Foundation. The foundation recently sold 100 ETH, bringing the total ETH sold this year to over 3,500. Such actions can affect the market mood and the continued growth of projects within the Ethereum network.
Future trends and investor sentiment
As the crypto and stock markets become more interconnected, investors are rethinking their plans. In the cryptocurrency industry, more and more people want to learn more about areas other than Bitcoin and Ethereum, such as options.
Recently, meme coins such as Shiba Inu and PEPE have gained popularity among investors, with certain sectors such as gaming and layer 2 solutions reporting impressive gains of up to 17% in just one week .
As October, traditionally a strong month for cryptocurrencies, approaches, there is growing speculation that favorable market conditions could lead to further price increases for both asset types.
The increasing participation of institutional investors in the cryptocurrency market is also influencing this trend, as their trading patterns typically match those of stocks.
Featured images from Pexels, charts from TradingView
