- The FOMC report had different impacts on the crypto and stock markets.
- Positive funding rates and increased accumulation by large investors indicate bullish sentiment toward Bitcoin and ETH.
The latest report from the Federal Open Market Committee (FOMC) sparked different reactions from the crypto and stock markets.
Though the price moved differently, there was bullish sentiment toward crypto. Other critical indicators revealed whether investors were feeling bullish or bearish about Bitcoin and Ethereum. What are these metrics, and how do they reflect the market's sentiment toward recent developments?
Crypto/Stock diverging correlation post-FOMC Report
On 3 May, the highly anticipated FOMC report was finally unveiled, and it largely met expectations as an interest rate hike had been anticipated.
As per the official FOMC release, the Committee had decided to increase the target range for the federal funds rate to 5% to 5.25%. Following the release, both the stock market and the crypto market reacted, but in different ways.
According to data from Santiment, the stock market, as represented by the SPX 500, experienced a decline. In contrast, the crypto market, as defined by Ethereum and Bitcoin, witnessed an uptick, indicating a reduced correlation between these two industries.
Source: Santiment
At the beginning of 2023, crypto exhibited a daily correlation coefficient of nearly 0.90 with major stock indices such as the S&P 500, Nasdaq, and Dow Jones Industrial Average (DJIA).
However, those correlations have significantly decreased and are now approaching zero. This suggests that investors perceived the influence of monetary policy on crypto assets differently.
The fact that crypto was no longer closely correlated with these traditional assets implied that the crypto market was carving out its unique space. Also, investors may be beginning to view it as a separate asset class with distinct drivers and characteristics.
Crypto funding rates stay positive
According to data from Coinglass, funding rates for Bitcoin and Ethereum have been primarily positive throughout 2023.
While some exchanges displayed negative funding rates for BTC, major exchanges such as Binance showed positive funding rates. Similarly, although some exchanges revealed negative funding rates for ETH, positive funding rates remained dominant.
The prevalence of positive funding rates for both cryptocurrencies suggested that investors were feeling bullish and optimistic about the market's prospects.
Whale continues crypto accumulation
As of this writing, per Santiment data, the supply held by addresses with over 100,000 BTC and 100,000 ETH increased. This trend indicated that entities with significant capital to invest in cryptocurrencies are directing their funds towards both assets.
The trend for ETH was more gradual, with a decline that began in September 2022, reaching a potential low point on 20 April 2023.
Source: Santiment
In contrast, the movement of Bitcoin whales has been more erratic, with sharp increases followed by rapid declines. Despite this volatility, the fact that large investors continue accumulating both cryptos suggests that they are optimistic about the long-term potential of these assets.
Source: Santiment
While the initial reaction to the recent FOMC announcement on both the crypto and stock markets has been observed, the full effect of this announcement is not yet clear.
As time passes, the correlation between these two asset classes will become more evident as investors weigh their options and decide which assets to invest in more.
No comments:
Post a Comment