Experts consider what is happening in the context of the situation with the base interest rate in the United States. This is an indicator that determines the availability of financial loans and the cost of obtaining them.

Last Wednesday, the U.S. Federal Reserve reduced the rate for the first time in more than four years. The indicator sagged by 50 basis points at once, that is, not by the minimum 25 basis points. The markets reacted positively to the situation, because such changes will reduce the pressure on the economy and at the same time make investors look for new instruments for investment.

US Fed Chairman Jerome Powell

At the end of last week analysts of Bank of America said that the U.S. Federal Reserve will be forced to reduce the rate by 75 basis points in the fourth quarter of 2024. This is necessary to stabilise the economy.

The next FOMC meetings, during which the bankers will announce decisions on the base rate, will be held on 7 November and 18 December.

What affects the cryptocurrency market today

A report from Bloomberg representatives said that the 40-day correlation coefficient between the top 100 cryptocurrencies and the S&P500 index is now around 0.67 points.

This level was only surpassed in the second quarter of 2022, when the index reached 0.72 points. According to The Block’s sources, Bitcoin fell to around $19,000 in mid-2022, which coincided with the S&P500 falling to 3,674.84 points.

Correlation between the cryptocurrency market and the stock index

Since then, the index has risen 35 per cent to hit a new all-time record at the 5702.55 point line. Bitcoin has also risen significantly over the aforementioned timeframe – by 69 per cent.

The data from Bloomberg analysts coincide with a recent report by Coinbase experts David Khan and David Duong, who estimated Bitcoin’s correlation with the S&P500 index at 0.69 points. As a reminder, a correlation coefficient of 1 means that asset prices are perfectly changing in one direction one after the other.

Conversely: a coefficient of -1 means a perfect negative correlation. In such a case, prices move in strictly opposite directions and are exactly independent of each other in their behaviour.

Bitcoin is testing a dynamic resistance level

Head of research at FalconX David Lowant said that the positive correlation between stocks and cryptocurrencies is expected to continue. So far, indicators suggest that the US economy is heading for a soft landing.

Such a scenario occurs when monetary policy effectively curbs inflation, supporting economic growth and avoiding a recession. Here is a commentary on the subject.

The correlation between cryptocurrency prices and stock indices is growing. It is likely to remain high for some time.

The expert added that the US base lending rate cut cycle combined with a soft landing is currently the base case scenario for most investors. It will create new favourable macroeconomic conditions for cryptocurrencies, as in such conditions the yields of traditional instruments like treasury bills will decrease.

And the holders of capital, accordingly, will have a reason to look for other investments with higher returns, among which cryptocurrencies are sure to stand out.

Another interesting news in the context of the market trend change is a noticeable jump in the profitability of Etherium. ETH outpaced Bitcoin in terms of price growth after the US benchmark lending rate was cut by 50 basis points last Wednesday.

Since the US Federal Reserve’s first rate cut in four years, the ETH cryptocurrency has risen in price by more than 16 per cent, while Bitcoin has gained about 6 per cent over the same period.

US benchmark lending rate

For now, however, ETH is not pulling its weight as a suitable asset for investment. As of today, the digital asset has declined by 24 per cent over the past six months, while since the beginning of 2024 its value has grown by 15 per cent.

Recently, this indicator went into negative territory, which means that the investment on 1 January 2024 turned out to be negative.

Indicators of changes in the value of Etherium ETH over different time periods

In comparison, Bitcoin has sagged by 8 per cent in six months, but has grown by 50 per cent since the beginning of 2024. While the same Solana SOL has increased in value by 655 per cent over the year, which is markedly outperforming most other large-cap digital assets.

Indicators of changes in the value of Bitcoin BTC over different time periods

The funding rate or the so-called funding of perpetual futures based on Efirium changed in a positive direction last Wednesday. Accordingly, there were more people willing to open long positions in ETH on the market.

Ruslan Lienha, head of markets at crypto exchange YouHodler, said that such changes indicate bullish sentiment among traders. However, it also carries the risk of a market correction if optimism becomes excessive or external factors become different. Here is his rejoinder on the subject.

The positive funding rate for Efirium reflects increased demand for long leveraged positions, signalling a bullish outlook.

A four-hour chart of the Etherium ETH rate on the Binance exchange

And while the analyst added that fundings in the crypto are prone to increased volatility, he stopped short of predicting an increase in the likelihood of another correction. In the meantime, this gives investors hope for the potential growth of Etherium in the long term.

The cryptocurrency itself has become a cause for jokes in the current cycle due to far from the best behaviour of the ETH price. As we have already noted, the day before, it dropped to negative returns compared to the 1 January 2024 figure.


So far, the impact of the rate cut by the US Federal Reserve representatives on the crypto market has been positive. Still, Bitcoin has managed to consolidate above $60,000, and digital assets - and especially popular altcoins - seem quite promising. So investors should keep an eye on further rate cuts and the results of the US presidential election at the same time.


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