Since Donald Trump’s election as U.S. president on November 5, Bitcoin (BTC) has surged by approximately 47%, notably outperforming the S&P 500’s 4% increase. Trump’s support for cryptocurrencies, along with the Republican control of Congress, could influence important regulations in the crypto space. According to Andre Dragosch from Bitwise, the stock Market is feeling pressure from the Federal Reserve’s recent decisions, which could pose short-term risks for Bitcoin despite its recent strength. On-chain factors, including a continued decline in Bitcoin exchange balances, have helped maintain its value. Currently, Bitcoin and the S&P 500 are showing a high correlation, which may impact their respective performances, especially in a challenging macroeconomic environment.
Since the election of Donald Trump as the U.S. president on November 5, bitcoin (BTC) has surged by about 47%. This impressive increase stands in stark contrast to the S&P 500, which has only managed a modest rise of about 4%.
Donald Trump’s favorable stance toward bitcoin and cryptocurrencies is crucial, especially considering the Republican control of both the Senate and the House of Representatives. This political landscape may significantly influence the regulation and legislation surrounding cryptocurrencies.
In an exclusive interview with CoinDesk, Andre Dragosch, the Head of Research at Bitwise in Europe, shared insights into the current Market behaviors. He pointed out that the U.S. Federal Reserve’s hawkish approach to rate cuts has had a negative impact on traditional markets, which has led to a divergence between bitcoin and stock performance. The Fed recently adjusted its rate cut projections for 2025, indicating a more cautious approach than the Market had anticipated.
Additionally, factors such as the DXY index, which measures the strength of the U.S. dollar, have risen by 5%. This typically puts pressure on risk assets, including cryptocurrencies. However, Dragosch noted that bitcoin has remained resilient, partly due to a declining supply on exchanges despite ongoing profit-taking from investors.
Recently, there seems to be a change in trend, with bitcoin and the S&P 500 beginning to move in closer correlation again. Their correlation coefficient has reached 0.88 over the last 20 days, suggesting a strong relationship between the two markets. While on-chain dynamics may continue to support bitcoin until mid-2025, the deteriorating macroeconomic landscape could pose risks for its price, especially in light of its correlation to stocks.
As investors watch the developments in both cryptocurrency and the broader financial markets, it will be interesting to see how these factors will play out in the coming months.
Key Takeaways:
– Bitcoin price surged 47% since Trump’s election.
– Political climate may influence cryptocurrency regulation.
– Correlation with stock Market rising again.
This exploration into bitcoin’s recent performance highlights the intricate interplay between political events, economic policies, and cryptocurrency dynamics. Stay tuned for further updates as the landscape evolves.
Tags: bitcoin, Donald Trump, cryptocurrency, stock Market, Federal Reserve, economic policy
What does it mean that Bitcoin (BTC) and the S&P 500 are starting to correlate?
When we say Bitcoin and the S&P 500 are starting to correlate, it means the price movements of Bitcoin are becoming more similar to those of the S&P 500. So, when the stock Market goes up or down, Bitcoin often does the same. This shows a connection between the two.
Why is the correlation between BTC and the S&P 500 important for investors?
This correlation is important because it can help investors make better decisions. If Bitcoin starts moving like the stock Market, investors might want to change how they manage their money in both areas. They may decide to invest more in Bitcoin or the S&P 500 based on Market trends.
Has this correlation been stable over time?
No, this correlation is not always stable. In the past, Bitcoin and the S&P 500 have moved differently. Sometimes they acted independently. But recently, they have been showing similar patterns, making this correlation more noticeable.
Does this mean Bitcoin is becoming less of a separate asset?
Yes, it can suggest that Bitcoin is becoming less of a unique investment. If it follows the stock Market closely, it might not serve the purpose of being a “safe haven” asset. Investors typically see Bitcoin as a way to diversify, but this correlation could change that view.
How can investors use this information about BTC and the S&P 500?
Investors can use this information to adapt their strategies. If Bitcoin and the S&P 500 are linked, they may look to balance their portfolios differently. They could decide to invest more in traditional stocks or change their focus on crypto assets based on how these two behave together.