Bitcoin Climbs With US Equity Futures as Traders Digest Fed Cut

By Investor Empires On Sep 19, 2024

(Bloomberg) — Bitcoin hit a three-week high alongside a jump in U.S. stock futures as a sharp interest rate cut by the Federal Reserve rattled markets.

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The digital currency rose about 3.9% before trading at $61,900 as of 7:11 a.m. Thursday in London. S&P 500 futures and global stocks also rose as traders adjusted to the start of the Federal Reserve’s expected monetary easing cycle.

The U.S. central bank cut borrowing costs by 50 basis points, the first reduction in more than four years. But Fed Chairman Jerome Powell was careful to avoid committing to a similar pace in the future, saying moves would be guided by economic data. That nuanced view tempered market reaction in U.S. business hours on Wednesday.

“The strong start to the easing cycle is excellent news for risk assets including Bitcoin. It took the market a few hours to see the big picture and start reflecting the improved expectations,” said Caroline Moron, co-founder of Orbit Markets, a company that provides liquidity for trading digital asset derivatives.

Opinion was divided ahead of the Fed meeting over whether officials would opt for a quarter-point or half-point move. Powell and his colleagues are trying to keep the U.S. economy strong while balancing risks to the labor market and inflation.

“The focus will quickly shift to the size and extent of this cycle,” said David Lawant, head of research at FalconX. “The most important factor to watch from here on out will be the trajectory of economic activity.”

Correlations between cryptocurrencies and traditional investments like stocks have jumped recently, a sign that macroeconomic variables were impacting digital asset markets, Lawant said.

Elsewhere, U.S. Treasuries fell, possibly reflecting Powell’s cautious signal about the extent of future monetary easing.

“The Fed’s continued reactionary function remains unclear,” Chris Weston, head of research at Pepperstone Group, wrote in a note. “They are still on an unplanned path.”