Stubborn Bitcoin remains stuck to U.S. equities

Bitcoin and U.S. stocks are more connected than they’ve ever been. Data shows the two markets are moving in almost perfect sync. 

A 40-day correlation between the top 100 digital assets and the S&P 500 Index has reached 0.67. The only time this was higher was in Q2 2022 when it hit 0.72. 

A score of 1 means the assets move exactly alike, while -1 would mean they’re moving in opposite directions.

Bitcoin recently surged past $64,000, after the Federal Reserve’s aggressive interest rate cut of 50 basis points. 

It also triggered a rally in stocks, hitting all-time highs.

The Personal Consumption Expenditures (PCE) price index, a key inflation gauge for the Fed, will be released later this week. 

Also, comments from the committee are expected, providing more clues about what they might do next.

Yesterday, Kamala Harris made a promise to boost investment in artificial intelligence and crypto if she wins, creating some semblance of bullish sentiment. 

And China’s decision to cut borrowing costs is also expected to add to the momentum.

When rates go down, liquidity increases. Investors are more likely to chase after higher returns, which is why we see cryptos benefiting from this scenario.

But this works both ways. If the stock market crashes, you can bet that crypto will get dragged down too. Investors tend to pull out of risky investments in times of uncertainty.

Gold has also been a part of this economic story. With the rate cut, gold prices have stayed steady near a record high. 

The precious metal hit $2,625.77 an ounce. Traders are monitoring rising tensions in the Middle East, especially between Hezbollah and Israel. 

Any potential escalation could send gold prices even higher as it is often seen as a safe-haven asset.

Meanwhile, Fed Governor Christopher Waller has already promised more rate cuts. He expects a quarter-point cut in November and another in December.

The GDP growth for Q2 was revised upwards to 3%, surpassing earlier estimates of 2.8%. This has eased some of the fears about a recession.

Unemployment claims also fell to 231,000 last week, beating the forecasted 232,000, so the labor market is still strong.

But while the Dow Jones Industrial Average hit a record high of 41,240.52, other indices like the S&P 500 and Nasdaq saw mixed results due to sector-specific performance. 

Sectors like materials, utilities, and energy enjoyed gains as commodity prices rose. But tech stocks saw more volatility. Nvidia fell about 2% ahead of its earnings report, which caused the drag.