Digital Assets Show High Correlation With U.S. Stock Market

According to PANews, a recent study by Bloomberg reveals that the correlation between digital assets and the US stock market has reached near-record levels. This indicates that the macroeconomic variables influencing 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. This level was only surpassed in the second quarter of 2022 when it reached 0.72. A coefficient of 1 indicates that the assets move in perfect unison, while a coefficient of -1 indicates they move in opposite directions.

Last week, the Federal Reserve significantly cut interest rates by 50 basis points, initiating the anticipated monetary easing cycle. Caroline Mauron, the co-founder of digital asset derivatives trading liquidity provider Orbit Markets, stated, ‘Macroeconomic factors are currently driving cryptocurrency prices up, and this trend is expected to continue throughout the Federal Reserve’s easing cycle unless we see a cryptocurrency-specific black swan event.’

This week’s focus will be on comments from Federal Reserve officials and the release of the US Personal Consumption Expenditures (PCE) Price Index. Sean McNulty, head of trading at liquidity provider Arbelos Markets, commented, ‘We believe that the speakers are more important than the PCE inflation data because the market is currently trying to understand the Federal Open Market Committee’s (FOMC) reaction function.’