Cryptocurrency and U.S. stock market correlation near all-time highs driven by macro factors

The degree of co-movement between digital assets and the U.S. stock market is near record highs, according to a correlation study, suggesting that macroeconomic variables driving the stock market are also shaping the crypto market. The 40-day correlation coefficient measuring the largest 100 digital assets and the S&P 500 is about 0.67, according to data compiled by Bloomberg, and the indicator only exceeded 0.72 in the second quarter of 2022. A reading of 1 means that the assets move in sync, while a reading of -1 indicates that they move in opposite directions. Last week, U.S. stocks hit record highs and Bitcoin prices exceeded $64,000 after the Federal Reserve cut interest rates by 50 basis points, kicking off an expected monetary easing cycle. Upcoming U.S. economic data is now critical for traders of all kinds, who can get clues about the possible extent and speed of further cuts to benchmark borrowing costs. Caroline Mauron, co-founder of Orbit Markets, a provider of liquidity for digital asset derivatives trading, said: "Macro factors are currently driving cryptocurrency prices, and unless we see a crypto-specific black swan event, this should continue throughout the Fed's easing cycle." (Bloomberg)