According to Santiment, a crypto markets intelligence platform, there is a bullish perspective on Bitcoin after the Federal Reserve raised its benchmark interest rate by 25 basis points on Wednesday. This optimism is attributed to Bitcoin’s diminishing correlation with equities, as evident from market behavior following the rate hike.
The market’s reaction to the rate decision was one of relief, with anticipation now shifting to the next decision scheduled for June. Since the announcement, Bitcoin has surged modestly by 2%, and trading volume across top market cap assets has increased. Moreover, active addresses skyrocketed right after the rate hike, marking the highest address activity day in two weeks. This rally seems to be closely related to the rate hike becoming official.
The decrease in correlation between Bitcoin and equities might be an essential factor to consider, as equities are acutely responsive to central bank activities. In comparison to previous rate hikes this year, which led Bitcoin and equities to multi-year lows, Bitcoin’s moderate reaction on Wednesday was a stark contrast. Santiment highlights that the impact of the Fed’s predictable decision could have been overshadowed by speculation surrounding the outcome of the situation.
The declining correlation between Bitcoin and equities is evident since the collapse of Silicon Valley Bank in May. Interestingly, during this time, Bitcoin’s correlation with gold has surged. Both gold and Bitcoin are often compared as non-sovereign, safe-haven assets, given their immunity to fiat currency debasement and shielding from modern banking system issues.
On the other hand, there is skepticism about whether the recent rise of Bitcoin is sustainable, mainly due to the ongoing legal issues faced by Binance – one of the top market cap assets – after the exchange was sued by US regulators. The platform has been shorted throughout the past month, affecting the overall market sentiment.
While it’s evident that the market is observing some positives signs for Bitcoin after the rate hike, it’s crucial to remain cautious and consider the potential challenges faced by the broader market. Market participants should continue to monitor any regulatory developments and changes in correlation between Bitcoin, equities, and gold, which could impact the future of this leading cryptocurrency.
Source: CryptoPotato
