Crypto and stocks correlate at 0.67 after Fed rate cuts

The correlation between cryptocurrency and stock markets has risen significantly following the recent interest rate cuts by the Federal Reserve. 

Analysts indicate that macroeconomic factors are increasingly shaping the behavior of both markets, a trend expected to persist in the near future. 

Historically viewed as “uncorrelated assets,” cryptocurrencies, including Bitcoin (CRYPTO:BTC), are now aligning closely with stock market movements. 

According to Bloomberg data, the correlation level between the 100 largest digital assets and the S&P 500 index has reached 0.67 over the last 40 days, nearly matching the all-time high of 0.72 recorded in Q2 2022. 

This shift signals a potential re-evaluation of how investors approach these asset classes. 

The recent increase in correlation aligns with a broader market rally. 

Following the Federal Reserve's rate cuts, U.S. stocks have achieved new highs, with major indices reflecting strong performance. 

Gold prices have also experienced upward momentum. 

Bitcoin has notably surpassed the $64,000 mark, benefiting significantly from these easing policies. 

According to Caroline Mauron, co-founder of Orbit Markets, this correlation could persist as long as the Federal Reserve continues its easing cycle. 

She remarked, "Macro factors are driving crypto prices currently, and this should continue throughout the Fed’s easing cycle unless we see a crypto-specific black swan event." 

In July, IDX Advisors’ CIO Ben McMillan predicted this correlation would remain strong, noting that it was at 0.6 at that time. 

He asserted, “We’re not going to go back to the days of Bitcoin being zero or even negatively correlated to risk assets. It’s something to factor in when you think about it within your portfolios.”