The Dow Jones Industrial Average surged by 617 points on November 28, its biggest rally since March. Soon an unexpected rebound of the U.S. stock market followed, which including the crypto market as it increased by more than $23 billion in valuation. Can this be the silver lining that the crypto enthusiasts have been waiting for?
Jerome Powell, Federal Reserve Chairman announced on Wednesday that interest rates have declined to a neutral level. This reflects the recovering performance of the market and the U.S. economy over the past several months. Powell said:
“Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy — that is, neither speeding up nor slowing down growth.”
U.S. President Donald Trump vocally opposed the interest rates of the Federal Reserve and attributes the recent sell-off of the market to the fed rate hike.
Rober Pavlik, SlateStone Wealth executive said that the investors in the U.S. market were waiting for the pullback of the Federal Reserve interest rate. Thus chairman Jerome Powell’s statement aided the U.S. stock market to bounce by a large margin. He noted:
“[Pwell’s comments are] exactly what the market was expecting to hear. Obviously it has to do with the market reaction to his previous comments. He had to walk that back.”
The past two weeks have been harsh on the cryptocurrency market as well, it suffered a steep decline, losing more than $90 billion of its valuation at one point.
Amongst a variety of reason attributed to the current state of the market, some consider that the hash war between Bitcoin Cash and Bitcoin Cash SV is the key reason, while some argue that the CME and CBOE Bitcoin futures market largely impacted the price trend of Bitcoin (BTC).
A portion of cryptocurrency investors, albeit small, supported the notion that the abrupt decline in the confidence towards U.S. stock markets led investors to liquidate high-risk assets, which includes cryptocurrencies. The investors feared a stock market crash and thus wanted to corner their investments onto a more reliable source.
With the recovery of the U.S. stock market, the cryptocurrency market also recorded a recovery d by more than $23 billion. Notably, Bitcoin recorded its largest single-day price surge since April, when the price of Bitcoin increased from the $6,000 region to $8,000 within a matter of minutes.
Showcasing extreme volatility in the range between $3,000 to $5,000, currently, the market does not inspire positivity. Technical analysts in the cryptocurrency market note that a pullback to the low region of $3,000 could be plausible.
In the past two days, BTC has managed to recover from $3,300 to $4,300, though a decent momentum, it isn’t a strong current that can conclusively declare that the bottom of Bitcoin is established.
On paper crypto and the U.S. stock market do not have a direct relationship, however, a healthy and steady U.S. economy in the months to come could inspire more investors to explore the cryptocurrency ecosystem. In addition, Bakkt futures market by ICE and the New York Stock Exchange will be launching their Bitcoin product in January and recently, NASDAQ announced their plans to list Bitcoin Futures In Q1 Of 2019, these projects validate the market further and invite institutional investors to incline.