Crypto outperforms stocks in brutal week for global markets
Digital assets are showing signs of disconnection from traditional markets
Major cryptocurrencies are showing signs of strength despite a rising dollar wreaking havoc on global stock markets and major currencies this week.
The S&P 500 index and tech-heavy Nasdaq have fallen more than 4% each in the past seven days. Meanwhile, Bitcoin has gained 0.7% and Ether fell less than 2%.
The link is significant given how closely Bitcoin, Ether and other cryptocurrencies have tracked stocks in recent quarters. This correlation has led skeptics to dismiss Bitcoin as a haven from inflationary economies and their sovereign currencies.
On September 28, the US Dollar Index (DXY), a widely watched measure of the dollar’s relative value against other major currencies, traded at its highest level since 2001 before paring the gains.
As a result of the US Federal Reserve’s aggressive anti-inflation policies, the euro is now trading firmly below $1, and emerging market currencies have swooned.
Against this macroeconomic backdrop, investors are drawing attention from the fact that Bitcoin and Ether have not broken their June lows.
Market observers point to several factors that can contribute to digital assets’ better results.
Speaking at a conference in Singapore, Mike Novogratz, CEO of Galaxy Digital, told Bloomberg that he believes the crypto’s relative strength is due to the fact that most forced sellers have already exited the market over the summer.
“We’re in this weird equilibrium where there’s a few buyers, there’s a few sellers, and there’s not that energy in the market that you see in the stock market or the bond market where you have to sell, right?” Novogratz said.
Jeff Dorman, CIO of Arca, has argued for some time that crypto has disconnected from macro following the sharp sell-off seen in the wake of the Three Arrows collapse and the associated CeFi contagion.
Popular crypto trader Pentoshi is cautiously optimistic. “How I see $BTC here is a value range. Deep value 12-15k if we get it. I have bought here as mentioned,” he tweeted earlier today.
With CME’s FedWatch tool pointing to another rate hike of 0.75% in November, anxious crypto investors will no doubt be hoping that the “de-coupling” continues.
