- The FOMC report had different impacts on the crypto markets and the stock markets.
- Positive funding rates and increased accumulation by large investors indicate bullish sentiment towards Bitcoin and ETH.
The last report of the Federal Open Market Committee (FOMC) triggered different reactions from crypto markets and stock markets.
Although the price moved differently, there was bullish sentiment towards cryptocurrencies. Other critical indicators revealed whether investors were feeling bullish or bearish on Bitcoin and Ethereum. What are these metrics and how do they reflect market sentiment towards recent developments?
Post-FOMC Crypto/Stock Divergent Correlation Report
On May 3, the highly anticipated FOMC report it was eventually released and largely met expectations as an interest rate hike had been anticipated.
According to the official FOMC statement, the Committee had decided to increase the target range for the federal funds rate from 5% to 5.25%. Following the launch, both the stock market and the crypto market reacted, but in different ways.
According to data from Holy, the stock market, represented by the SPX 500, experienced a crash. On the contrary, the crypto market, as defined by Ethereal and Bitcoinwitnessed a rebound, indicating a reduced correlation between these two industries.
Source: Feeling
As of early 2023, cryptocurrencies exhibited a daily correlation coefficient of nearly 0.90 with major stock indices such as the S&P 500, Nasdaq, and Dow Jones Industrial Average (DJIA).
However, those correlations have decreased significantly and are now close to zero. This suggests that investors perceived the influence of monetary policy on crypto assets differently.
The fact that cryptocurrencies were no longer closely related to these traditional assets implied that the cryptocurrency market was carving out its unique space. Also, investors may start to view it as a separate asset class with different drivers and characteristics.
Crypto Funding Rates Remain Positive
According to Coinglass data, funding rates for Bitcoin and Ethereal have been mainly positive throughout 2023.
While some exchanges showed negative funding rates for BTC, major exchanges like Binance showed positive funding rates. Similarly, while some exchanges revealed negative funding rates for ETH, positive funding rates remained dominant.
The prevalence of positive funding rates for both cryptocurrencies suggested that investors were feeling bullish and optimistic about the market outlook.
Whale Continues Crypto Accumulation
At the time of writing, according to Santiment data, the supply in the hands of addresses with more than 100,000 BTC and 100,000 ETH increased. This trend indicated that entities with significant capital to invest in cryptocurrencies are directing their funds towards both assets.
The trend for ETH it was more gradual, with a decline beginning in September 2022, reaching a potential low point on April 20, 2023.
Source: Feeling
Instead, the movement of Bitcoin whales has been more erratic, with strong increases followed by rapid decreases. Despite this volatility, the fact that large investors continue to accumulate both cryptos suggests that they are optimistic about the long-term potential of these assets.
Source: Feeling
While the initial reaction to the recent FOMC announcement has been seen in both the crypto and stock markets, the full effect of this announcement is still unclear.
As time goes on, the correlation between these two asset classes will become more apparent as investors weigh their options and decide which assets to invest more in.
