The FED cut interest rates by 50 basis points last week, boosting the Bitcoin and cryptocurrency markets.
As BTC and crypto prices surged, the positive correlation between cryptocurrencies and US stocks also increased.
The correlation between the top 100 crypto assets and the US S&P 500 stock index currently stands at around 0.67, rising to levels not seen since mid-2022, Bloomberg reported.
According to analysts, this close relationship in price movements shows that the macroeconomic factors affecting US stocks also significantly affect the cryptocurrency sector.
Evaluating the rise in the positive correlation between US stocks and cryptocurrencies, FalconX Research President David Lawant stated that he expects the correlation to continue, especially with the decline in inflation data.
“Correlations between crypto prices and equity indices are on the rise and are likely to remain high for some time to come.
The low interest rate cycle initiated by the Fed is currently the base case scenario for most investors, and this rate cut cycle will usher in a new macro environment for crypto.
“Moreover, the combination of positive US presidential election results and a more favorable liquidity environment for risky assets could kick-start the next crypto bull market.”
Galaxy Portfolio Manager Chris Rhine said that the FED's start of the interest rate reduction cycle has put stocks and cryptocurrencies, which are in the consolidation process, in a favorable position for an uptrend.
Rhine said there are more positive catalysts than negative catalysts for both markets, and he expects the correlation to remain high.
Finally, Orbit Markets co-founder Caroline Mauron stated that unless an unexpected major event occurs in the crypto market, the correlation with stocks is expected to continue intact, and during the Fed's interest rate cut period, crypto prices are mainly affected by broader economic factors.
*This is not investment advice.