Bitcoin, Ether Decouple From Stocks: What's Next for Crypto After Fed Rate Hike?

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A recent decoupling of bitcoin and ether from traditional markets indicates that the assets will trade on their own merits. GWilliamsJr_CMT writes

A 14-month monetary tightening cycle that included 10 consecutive interest rate increases by the U.S. Federal Reserve has taken the federal funds rate to 5.25%, a level considered its probable stopping point.

While some market observers expect interest rates to increase another 25-50 basis points in future, the Federal Open Market Committee “participants’ assessment of appropriate monetary policy” , implies that 5.25% is appropriate.Investors are ultimately concerned with the future value of the assets they own, more so than what affected that value in the past. Here are a few points worth considering.The reduced activity implies that investors are staying on the sideline to a certain extent.

The lack of correlation between BTC and traditional assets implies that investors are viewing the impact of monetary policy differently for digital assets than for stocks, at least for the moment. BTC’s correlation with copper, the U.S. dollar and gold has declined as well. It’s not abundantly evident what would cause such widespread decoupling, or how long it will remain. The re-emergence of BTC as an alternative to fiat currency debasement and ETH’s continued contracting supply are factors that may explain their separation from traditional assets.With the exception of sharp decline on the day of Silicon Valley Bank’s collapse, funding rates have been positive for the better part of 2023 for both cryptocurrencies.

The trajectory for ETH appears to be a measured one, with a decline that began in September seemingly bottoming out on April 20. Bitcoin whales’ movements have been more dramatic, with sharp moves higher followed by declines.While today’s economic news will have some impact on prices, the extent to which it does will likely differ from traditional financial assets.

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