Stocks and Bitcoin’s Correlation At The Top! What Experts Say

The US Federal Reserve (FED) yearly Jackson Hole meeting took place today. After Fed Chairman Jerome Powell’s hawkish statements at the meeting cryptocurrencies and stocks of major technology companies saw sales.

After Powell’s speech S&P 500 The leading cryptocurrency, down 3.37% bitcoin 4.47%, Ethereum it lost 8.74% in value.

US Stock Exchanges Closed the Week with Sellers:

Dow Jones -3.03
SP&500 -3.32
Nasdaq -3.94#Bitcoin $20,700

— Bitcoin System (@bitcoinsystem) August 26, 2022

Bill Cannon, portfolio manager of Valkriye Investments, a major digital asset management fund, spoke about the reaction of the markets after Powell’s speech:

“Powell’s speech at Jackson Hole comes as no surprise. Everyone knows that the increase in interest rates on the FED side will continue. A 75 basis point rate hike is expected for September. Powell’s statement was in line with expectations. However, despite this, I could not understand why there was a reaction sale in the markets.”

The remarkable data for recent months is that cryptocurrencies, especially Bitcoin, move in parallel with the stocks of technology companies in the American stock markets.

Patrick Feeney, a former hedge fund manager, shared his view on the situation:

“Bitcoin was expected to be a digital gold, but so far this has not been the case. Bitcoin moves in parallel with the stocks of technology companies, not gold.”

Correlation Between Bitcoin and Stocks

According to data from CoinMetrics, the correlation coefficient between Bitcoin and American stock exchanges reached 0.65 last May. At the beginning of August, the correlation rate was hovering around 0.4. However, since the beginning of this week, it is seen that the joint action rate has increased with the correlation rate up to 0.5.

Since the beginning of the year, there has been a bear season in the cryptocurrency markets. Bitcoin and Ethereum have lost 50% of their value since the beginning of the year.

Despite the monthly decline in the US inflation data in July, the FED is more firm in raising interest rates. The targeted annual inflation rate as a result of monetary tightening policies is 2%. Until this target is met, rate hikes are expected to continue until at least the beginning of 2024.

Analysts in general do not expect a new rally in cryptocurrencies unless the macroeconomic conditions in which tight monetary policies are implemented around the world change.