Looser monetary policy is often viewed as favourable for speculative assets like crypto
Bitcoin and other cryptocurrencies turned higher after disappointing US jobs data bolstered the case for more aggressive rate cuts from the Federal Reserve, joining a rally in bonds and a rebound in equities.
The original crypto asset was up 1.1 per cent at US$56,707 as of 9.04 am in New York, with Ether and most other major tokens also trading higher. US equity futures also turned higher, and Treasuries rallied.
Swaps traders pushed higher the probability that the US central bank will reduce rates by a half percentage point when they gather later this month in the widely expected first cut in over four years. The probability of an outsized reduction rose to around 50 per cent from about 36 per cent prior to the data release. For all of 2024, the contracts now imply about 115 basis points of reductions – up from around 108 basis points earlier in the session.
Looser monetary policy is often viewed as favourable for speculative assets like crypto.
Bitcoin and other major tokens have been tracking global equities very closely in recent weeks. A 30-day correlation coefficient for a gauge of the largest 100 digital assets and MSCI’s index of world shares is near 0.60, one of the highest levels in the past two years, data compiled by Bloomberg show. A reading of 1 indicates assets are moving in lockstep, while minus 1 signals an inverse tie.
“Bitcoin has been responding to macro events in a highly correlated manner to equities,” said Benjamin Celermajer, co-chief investment officer at Magnet Capital.
Investors had been on tenterhooks for the employment data amid uncertainty over whether a slowdown is brewing in the world’s top economy, and the likely pace of ensuing interest-rate cuts by the Federal Reserve. A surprisingly weak jobs report last month stoked global market volatility, including a crypto slump.
Inflows into US spot-Bitcoin exchange-traded funds spurred the record-breaking rally in the largest digital asset earlier in the year. But the bull run then fizzled, and the ETFs have suffered a spell of outflows in recent days. BLOOMBERG
