Olliv the Above: A curious uncoupling for stocks & crypto

Market watchers might say that different asset classes are correlated if their prices move in similar directions at the same time. But the correlation between the stock market’s performance and bitcoin’s price has become less apparent over the past few months, even approaching the zero mark.

Recent prices indicate the declining correlation between bitcoin’s price and both the Nasdaq and S&P 500, reaching its lowest level since late 2021, according to data tracked by the analytics firm Block Scholes. With this decoupling, bitcoin would be an asset that moves independently of other investment classes and may signal a nifty place for investors to diversify.

Crypto catch up: How does bitcoin work?

The minutes from the Federal Reserve’s June 13-14 meeting were released last week, providing some insight into the decision-making process behind setting borrowing rates for the United States’ central bank.

The Fed decided to pause on rate hikes for June, noting that a reprieve from the steady increase to interest rates “was appropriate in order to provide additional time to observe the effects of cumulative tightening and assess their implications for policy,” the minutes said.

The minutes went on to indicate that future rate hiking is likely (if not certain), and markets have more or less priced in continuing rate hikes for the rest of the year.

ICYMI: Fed pauses rate hikes in June 2023 meeting

The head of the world’s largest asset manager spoke highly of bitcoin in a televised interview with Fox Business on July 5, 2023. Larry Fink, CEO of BlackRock, called bitcoin “an international asset” and summarized his (rather hopeful) view of BTC’s role in hedging against local currency inflation or devaluation. “It’s not based on any one currency,” Fink said, “and so it can represent an asset that people can play as an alternative.”

In late June, BlackRock filed papers with the SEC for a spot bitcoin exchange-traded fund (ETF) while other institutional players like WisdomTree and Invesco refreshed their own spot bitcoin ETF filings from previous years. There is probably some advantage to being a first mover in the space to offer investors a chance to buy into a cryptocurrency index like an ETF without having to hold any crypto directly. BlackRock’s ETF filing is seen as driving up prices for bitcoin at the end of June, bringing it up to the crucial $30K threshold ahead of last week’s Independence Day holiday.

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