Crypto ‘decoupling’ story ends as stocks follow Bitcoin’s rally

Takeaways from the conference:

• Federal Reserve liquidity plans, along with strong corporate earnings and equities are keeping crypto and cryptocurrencies afloat despite weak US manufacturing data.

• Crypto market capitalization has risen by 8.5% in the last three months.

The need to have a “clear” crypto currency has been emphasized by cryptocurrency traders.decouplingBitcoin intraday fluctuations over the past ten days.BTC) and major altcoins have closely tracked those of the S&P 500, even as trade war developments have dominated market sentiment.

The decoupling of digital assets from the stock market would be a validation that they are a separate class, and it could also address concerns over upcoming global recessions. The market has been unable to ignore this correlation, which is leading participants to wonder if the crypto market will continue to be influenced by the stock markets indefinitely. They also ask what would need to happen for there to be a true decoupling.

Stocks continue to rise despite tensions in the trade war

The S&P 500 reached its peak on Feb. 19 and has since struggled to reclaim the 5,800 level, a support that had held for four months. Stocks have shown remarkable resistance despite the persistent pressure of US trade disputes, including those with Canada, Mexico and nearly every other major economy.

Chinese state-run media have reported in recent weeks that the United States is quietly negotiating trade agreements. China has imposed a retaliatory 125% tariff on US goods, but it has waived this for certain sectors, such as semiconductors and pharmaceuticals. US automakers have been partially exempted from the new tariffs. Both sides appear to be gradually making concessions.

There is a reasonable possibility that the S&P 500 established a bottom at 4,835 on April 7, with further gains from the current 5,635 level remaining plausible. The market is responding positively to the robust earnings of the first quarter, while companies are adapting to tariffs and moving production out of China or increasing operations in the United States.

Microsoft, for example, reported an increase of 13.2% in its revenue year over year, with increased margins and a strong demand for Artificial Intelligence. Meta, too, delivered on April 30, earnings and revenues that were higher than market expectations. The results of the Meta’s earnings and revenue have also exceeded market expectations on April 30.

Markets now focus on the Federal Reserve

Market participants pay more attention to the Federal Reserve’s policy decisions than the latest decline in US PMI Manufacturing data, which reached a 5-month low in late April. The Fed’s balance sheet has been reduced for a full year. considering asset purchases Help ease the selling pressure

A rise in liquidity can be favorable to risky assets. Even if there is no full decoupling, cryptocurrency could benefit from an improved macroeconomic climate.

In recent months, despite the correlation on a short term basis, the crypto market outperformed the stock markets. Since March, the total crypto market capitalization has risen by 8.5%, while the S&P 500 has declined by 5.3%. Over a six-month period, this divergence becomes even more pronounced: the total crypto market cap is up 29%, while the S&P 500 is down 2%. The idea that both markets have a perfect synchronicity is false, particularly on longer timescales.

Related: Bitcoin to $1M by 2029 fueled by ETF and gov’t demand — Bitwise exec

It is still premature to declare a definitive bottom for the S&P 500 or to conclude that the trade war has been resolved. The trade war is not over yet. economic recession It is likely that both markets will suffer negative consequences. The current strength of equities suggests that investors are less risk-averse. The elevated correlation between stocks and cryptocurrencies may be the best scenario for the moment.

The article does not provide legal advice or investment recommendations and it is intended for informational purposes only. These are solely the opinions, views and thoughts of the author and may not reflect the opinions and views of Cointelegraph.