Bitcoin Up After Fed Rate Reveal, Correlation With Stocks Over?

Bitcoin has surged above the $29,000 mark following the Fed’s 25bps rate hike, a sign that the asset could be decoupled from stocks.

Bitcoin has jumped despite Fed rate hike announcement

According to on-chain research firm Santiment, the cryptocurrency market has shown promising upside potential since the rate hike announcement was published.

Over the past year, interest rate hikes by the US Federal Reserve System (“Fed”) have generally been met with market panic, as coins such as Bitcoin and Ethereum have taken significant price hits in their wake.

This has been because the sector has experienced a high correlation with US stocks during this period, which means that the prices of the assets in the two sectors have moved in the same way.

Recently, however, things have changed for the better, as the cryptocurrency and stock markets have become increasingly separate. The initial reaction in the prices of assets such as Bitcoin and Ethereum to the latest announcement has also been a positive indication of this.

Here’s the comparison between BTC, ETH and the S&P 500 that Santiment posted an hour after the FOMC meeting:

Looks like BTC didn't move much following the event | Source: Santiment on Twitter

As shown in the graph above, the S&P 500 fell shortly after the rate hike, while BTC and ETH remained stable, showing the disconnect between the two sectors.

Both Bitcoin and Ethereum have rallied in the hours since then, breaching the $29,000 and $1,900 levels respectively. This could be a sign that investors are calm now that the meeting is behind them.

“At least for now, it seems the initial reaction to this rate hike was: ‘At least it’s over now. Crypto will no longer have to worry about fiscal policy until June,” notes Santiment.

On-chain data also shows that trading volumes of the top cryptocurrencies by market capitalization have increased since the meeting, an indication that activity has increased in the sector.

BTC's price has trended up since the announcement | Source: Santiment

Another indicator, the “active addresses”, which measures the daily total number of unique addresses participating in any transactional activity on the Bitcoin blockchain, has also observed an increase after this Federal Open Market Committee (FOMC) meeting day, as below the chart’s highlights.

The indicator's value has been going up during the past day | Source: Santiment

This metric provides an estimate of the total number of unique users using the network right now, so the value going up indicates that a high amount of traffic has visited the chain in the last 24 hours.

The latest surge in Bitcoin-active addresses is the highest seen in two weeks, with the one from two weeks ago largely due to a sharp drop in price.

“This rally seemed to be much more related to the rate hike finally becoming official, and you can see how active addresses were pushed even higher right after the announcement,” explains the chain research firm.

BTC price

At the time of writing, Bitcoin is trading around $29,200, up 1% in the past week.

BTC has surged in the past day | Source: BTCUSD on TradingView

Featured image from André François McKenzie at Unsplash.com, Charts from TradingView.com, Santiment.net