The broader cryptocurrency market is up 6.99% over the past 24 hours, while the stock market is down nearly 2% on the news.
- For most of 2022, the crypto space largely followed the ups and downs of the US stock market. That correlation seems to be weakening.
- Commodity prices rose 8.2% in September inflation, according to the US Bureau of Labor Statistics.
- With inflation continuing to rise, the Federal Reserve is almost certain to raise short-term interest rates by 0.75% next month.
On Thursday, the government released its inflation rate for September, confirming that inflation rose at a higher-than-expected level of 8.3% compared to September 2021. With inflation consistent at this level, the Fed may try to cool the red-hot economy by raising interest rates by 0.75% at next month’s meeting.
A tale of two asset classes
Interestingly, news of low inflation seems to have ignited a decoupling between the crypto sector and the tech stock market that has been closely mirrored throughout 2022. % from the inflation rate posted yesterday. Additionally, Bitcoin, the single largest and most valuable crypto asset, has risen more than 7% over the same period.
However, the S&P 500 (which tracks the stock prices of the top 500 most valuable companies) is down 1.83% as of this writing. This new divergence between stocks and cryptocurrencies could indicate that better things are to come for digital asset markets. seems like the new normal), inflation will fall and the value of the dollar will be suppressed. A falling dollar is good for anti-correlated crypto assets.
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Both the crypto and stock markets are burning with belief that the Federal Reserve will raise short-term interest rates by another 75 basis points in November. We’ll have to see if rate hikes can finally freeze inflation before the end of the year, but how stock and crypto markets react to more costly access to the dollar due to the Federal Reserve’s hawkish policies. It is also necessary to monitor the reaction to