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Cryptocurrencies rose as part of a broad stock market rally Thursday, a day after the Federal Reserve delivered a half-percentage-point interest rate cut, its first in more than four years.
The price of Bitcoin Bitcoin recently gained 5% to $63,255.00, according to Coin Metrics, building on an ongoing rally ahead of the central bank’s decision Wednesday. Bitcoin, like stocks, initially surged, then pulled back as traders absorbed the news.
“The strongest correlations between bitcoin and monetary growth have been positive and negative with the U.S. dollar,” said Matthew Sigel, head of digital asset research at VanEck. “With this Fed move, we believe the likelihood of strong bitcoin performance in the fourth quarter increases.”
Ether increased by 6%. Its competitor, the Solana token, jumped 10%.
Bitcoin Rises After Fed Decision Wednesday
Bitcoin price-linked stocks have been soaring. Bitcoin exchange operator Coinbase advanced by 3%. MicroStrategieswidely used as a high beta play on bitcoin price, gained 9%.
Some investors worry that the size of the interest rate cut, when the Fed could have eased policy by just a quarter-point, shows that policymakers must be more concerned about the economy than markets suggest. Others are more focused on lower borrowing costs, which could spur more liquidity, which could support prices.
Bitcoin behaves as both a hedge and a risk asset, and is currently more closely correlated to Nasdaq Composite Index that it is with gold.
Bitcoin gained 6% in September, the worst month of the year. But it’s not out of the woods yet, said Yuya Hasegawa, a cryptocurrency market analyst at Bitbank, the Japanese bitcoin exchange. He warned about the outcome of the Bank of Japan’s policy meeting, which began Thursday.
“The BoJ is likely to hold its policy rate steady this time, but signs of further rate hikes could boost (the Japanese yen) and trigger a resumption of the yen carry trade, which could lead to a sell-off in the Japanese stock market and risk-off sentiment could spill over into the cryptocurrency market,” he said. “Bitcoin has some time before the BoJ makes its decision and could extend its gains in Thursday’s US session. The next likely near-term target is around $65,000.”
