crypto strategy

Bitcoin Trading Like Big Tech as Reel Market – Blockworks

  • Stocks and cryptos plunged on Friday in the aftermath of Jackson Hole
  • According to analysts, Bitcoin in particular trades as a great technology value, and until there is a change in macroeconomic conditions, this will continue

Markets extended their decline on Friday after Federal Reserve Chairman Jerome Powell took a more hawkish stance during his remarks in Jackson Hole. Cryptocurrencies slipped further into the red as traders became increasingly discouraged by the Fed’s likely move in September.

The S&P 500 and Nasdaq were trading down 2.3% and 2.8% respectively at press time. Bitcoin and Ether also lost 4% and 7% respectively.

“Today’s reaction to Fed Chairman Powell’s Jackson Hole speech is somewhat surprising, as he really said nothing new, at least to Fed watchers, and markets seemed to have largely priced in a 75 basis point rate hike,” Bill Cannon, head of portfolio management at digital asset fund manager Valkyrie Investments, told Blockworks.

“Powell has been transparent in his recent comments that rate hikes were needed to calm inflation, and today’s statement reinforced that strategy,” Cannon said.

Cryptos have struggled to recover this year. Both bitcoin and ether are down more than 50% year-to-date, and with no significant change in macro conditions, analysts do not expect a rally.

“With inflation, bitcoin unfortunately acts like a tech stock,” said Patrick Feeney, former hedge fund trader and founder of Feeney Factor.

“[Bitcoin is] supposed to be digital gold, but that’s just not been the case lately,” Feeney said.

Bitcoin Correlation and Market Expectations

Bitcoin’s correlation coefficient with the S&P 500 hit 0.64 in early May before dropping to around 0.4 earlier this month, according to Data from Coin Metrics. A coefficient of 1 means the assets are moving perfectly in sync.

The trend is back to the upside, however, according to the data, with the correlation coefficient hovering around 0.5 earlier this week.

“Over the past year, the crypto and equity markets have traded tightly,” Clara Medalie, director of strategic initiatives and research at data provider Kaiko, told Blockworks earlier this month. this. “What we’ve seen over the past year is that correlations tend to strengthen around key economic data releases, such as Fed meeting notes or inflation numbers. ”

Recent data, such as falling unemployment figures and the latest Consumer Price Index (CPI) report, may suggest that inflation is slowing. The Fed’s preferred measure of inflation, the Personal Consumption Expenditures Price Index, which was released Friday ahead of Powell’s remarks, also shows price easing in July. The year-over-year change in July was 6.3%, down from 6.8% in June.

Still, Powell warned on Friday that there is still a long way to go before achieving lasting price stability.

“Longer-term neutral estimates are not a place to pause or stop,” Powell said during his speech on the second day of the Economic Policy Symposium, hosted by the Kansas City Federal Reserve. “Our decision at this September meeting will depend on the totality of incoming data and the evolution of the outlook,” he said.

According Data of the CME group.

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  • Casey Wagner


    Senior Reporter

    Casey Wagner is a New York-based business journalist who covers regulation, legislation, digital asset investment firms, market structure, central banks and governments, and CBDCs. Prior to joining Blockworks, she reported on markets at Bloomberg News. She graduated from the University of Virginia with a degree in media studies. Contact Casey via email at [email protected]

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