**Crypto News Analysis: Rising Correlation Between Cryptocurrencies and US Stocks—What’s the Implication?**
Following the Federal Reserve’s recent interest rate cut, a notable increase in the positive correlation between cryptocurrencies and US stocks has been observed.
**Author:** Elif Azra Güven
**Date:** 23.09.2024 – 20:03
**Update:** 11 hours ago
Last week, the Federal Reserve reduced interest rates by 50 basis points, which invigorated both the Bitcoin and broader cryptocurrency markets. As BTC and other crypto values soared, the positive correlation with the US stock market also intensified. Currently, the relationship between the top 100 cryptocurrencies and the S&P 500 index is approximately 0.67, reaching levels not seen since mid-2022, according to Bloomberg.
Analysts suggest that this strengthened correlation indicates that macroeconomic conditions influencing US stocks are also having a significant impact on the cryptocurrency sector. David Lawant, President of FalconX Research, commented on this trend, expressing his anticipation for the correlation to persist, especially as inflation data trends downward.
“Correlations between crypto prices and equity indices are on the rise and are likely to remain elevated for the foreseeable future. The low interest rate environment established by the Fed is now the prevailing scenario for many investors, and this cycle of rate cuts could lead to a new macroeconomic landscape for cryptocurrencies. Additionally, positive results from the US presidential elections, coupled with a more favorable liquidity climate for riskier assets, could potentially ignite the next bull market for cryptocurrencies.”
Chris Rhine, a Portfolio Manager at Galaxy, stated that the commencement of the Fed’s rate reduction cycle positions both stocks and cryptocurrencies—currently undergoing consolidation—favorably for upward movement. He noted that the number of positive catalysts outweighs the negative ones for both markets, and he anticipates the high correlation to be maintained.
Lastly, Caroline Mauron, co-founder of Orbit Markets, indicated that unless an unforeseen major event disrupts the crypto market, the correlation with stocks is expected to remain stable. During this period of interest rate cuts by the Fed, crypto prices are predominantly influenced by broader economic factors.
*Note: This should not be taken as investment advice.*
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