Cryptocurrencies are increasingly moving in tandem with American stocks after the U.S. Federal Reserve lowered interest rates by 50-basis points.
In fact, crypto prices are closely mirroring the movements of stocks more than at any time in the past two years, according to a new study on the correlation between the two asset classes.
A 40-day correlation coefficient of the largest 100 digital assets and the benchmark S&P 500 Index is at 0.67, a level exceeded only in the second quarter of 2022 when it topped 0.72.
A reading of one indicates that crypto and stocks are moving in perfect lockstep with each other.
U.S. stocks recently reached all-time highs after the Fed delivered its first interest reduction in four years, accelerating the rally in equity markets.
At the same time, crypto prices have also spiked following the rate cut, with Bitcoin (BTC) reaching $64,000 U.S., its highest level in months.
Lower interest rates are seen as positive for growth stocks and crypto and have led investors racing into riskier assets.
Many analysts see more gains ahead for both stocks and cryptocurrencies as Fed officials, and other central banks around the world, have signalled that further interest rate cuts are ahead.
Upcoming inflation data out of the U.S. could help to reinforce the case for further monetary policy easing, if it shows that consumer prices continue to trend towards the Fed’s 2% target.
Sentiment towards crypto got a jolt recently, when Kamala Harris pledged to help grow investments in artificial intelligence (A.I.) and crypto if she wins the presidency this November.
