According to a recent study by Coinbase, the relationship between cryptocurrencies and stock markets has become remarkable. This cooperation is about 50% as of September 2024, mainly due to the global monetary reduction programs carried out by major countries such as the United States and China. This research has important implications especially for investors trying to negotiate these mixed markets.
The Impact of Monetary Policy
The evolution of this link has been greatly influenced by the Federal Reserve’s aggressive approach to reducing interest rates. Following the recent 50-point drop, stocks related to Bitcoin and cryptocurrencies have made significant gains.
Bitcoin surpassed the level of $ 64,000, and shares such as Microstrategy and Coinbase also showed increasing momentum. This correlation suggests that, when the Federal Reserve makes measures aimed at improving economic development, both types of assets show a positive response.
Source: Coinbase
Interestingly, Bloomberg data suggests that US equity futures prices have been fluctuating in line with those of cryptocurrency. For example, as Bitcoin prices rose, many US stocks also achieved new all-time highs.
This partnership suggests a deeper connection between the way investors assess risk in both markets. Caroline Mauron, founder of Orbit Markets, noted that macroeconomic factors are currently driving crypto prices, a trend that may have persisted throughout the Fed’s easing cycle.
Crypto: Changing Market Dynamics
In the past, cryptocurrencies have operated independently of mainstream financial markets. However, the sensitivity of these digital assets to macroeconomic conditions has increased as they mature.
This change is reflected in the findings of Coinbase, which shows that Ethereum has succeeded Bitcoin during this period of increased connectivity. Ethereum’s 8% rise over Bitcoin in the week following the Federal Reserve’s announcement suggests that investor interest in altcoins may be changing.
Source: CoinbaseAlthough Ethereum’s performance has improved, investors continue to be concerned about the recent sale of the Ethereum Foundation. The foundation recently sold 100 ETH, thus bringing the total ETH sold this year to over 3,500. Such actions have possible consequences for the market situation and the continued growth of projects within the Ethereum network.
Future Trends and Investor Sentiment
As the connection between the cryptocurrency market and the stock market grows stronger, investors are rethinking their plans. More and more people in the crypto space want to learn more about places outside of Bitcoin and Ethereum, as options.
Memecoins like Shiba Inu and PEPE have recently gained popularity among investors, with certain sectors—such as gaming and Layer 2 solutions—reporting impressive gains of up to 17% in a single week.
As October approaches—a traditionally strong month for cryptocurrencies—there is speculation that favorable market conditions could lead to price increases in both asset classes.
The increasing participation of institutional investors in the crypto markets has also contributed to this trend as their trading patterns often resemble those of stocks.
Featured image from Pexels, chart from TradingView