Inflation Cools, Bitcoin and Stocks Bounce

There’s an old trader’s saying that “in a crisis, correlations go to 1.0”

article-image

BLOCKWORKS EXCLUSIVE ART BY AXEL RANGEL

share

Cryptocurrencies and equities posted significant gains Thursday following several sessions in the red as inflation data came back better-than-expected and digital asset traders digested the fall of FTX. 

Bitcoin and ether rebounded Thursday, rallying 12% and 21%, respectively. The bounce back comes a day after both currencies extended losses Wednesday when Binance backed out of the deal investors were hoping would save the industry. 

“This week’s events also underline the power of bitcoin as a genuinely decentralized cryptocurrency offering financial self-sovereignty to the individual — in stark contrast to supposedly reputable tokens that can be wiped out overnight,” a note from analysts at SatoshiLabs’ crypto hardware wallet, Trezor, read. “These crypto earthquakes stimulate a consumer response.”

Equities also ended the trading session in the green, thanks to lowered fears over inflation and heightening concern over a recession. The S&P 500 and Nasdaq closed 6% and 7% higher, respectively. Thursday’s Consumer Price Index came in lower than analysts’ expectations and showed a 7.7% increase in prices year-over-year and 0.4% increase over the last month. 

“As worries of recession and the potential for a financial shock overtake inflation anxieties, bond investors may want to consider ‘lengthening’ maturities, and stock investors should prepare for a renewed and sustained rally,” Jim Paulsen, chief investment strategist at The Leuthold Group, said. 

Even Wednesday’s sell-off, which saw the S&P 500 and Nasdaq Composite indexes closing 2.1% and 2.5% lower, respectively, should have been greater, Nicholas Colas, co-founder of DataTrek Research, said. 

“The decline should have been worse, given unexpected midterm results and volatile virtual currencies. Investor confidence needs a positive catalyst from here, however,” Colas said. 

Cryptocurrencies will still have a long storm to weather, analysts warn. 

“It will take weeks to learn the full extent of which firms have exposure to FTX and what percent of customer funds are recoverable,” Tom Nath, chief operating officer at BitOoda, said.

“FTX is still claiming that assets exceed customer liabilities, but that illiquidity is preventing them from unfreezing withdrawals,” he said.

Investor fear can spread across a brokerage account, Colas added. 

While [crypto] is theoretically very different from equities, many investors hold both on the same retail investor trading platforms. A sharp decline in online currency values can therefore spill over into other, unrelated, markets,” he said. “There’s an old trader’s saying that ‘in a crisis, correlations go to 1.’”


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Permissionless is a conference for founders, application developers, and users. Come meet the next generation of people building and using crypto.

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

4.png

Research

This months PPGC covered four main areas. Firstly, debriefing the progress and status of the mainnet implementation of the Ahmedabad hard fork. Secondly, a retrospective on the testnet phase of the Ahemdabad Hard Fork. Thirdly, an update on PIP-36 which involves replaying failed state syncs. Lastly, PIP-47 which pushes upgrades to the Polygon Protocol Council.

article-image

Sygnum’s head of investment researchthinks Solana can pass Ethereum by drawing institutions for tokenization platforms and stablecoins

article-image

Plus, NFT trading volumes are seeing all-time lows

article-image

And could BitGo’s offering dump the entire stablecoin market on its head?

article-image

Institutions to test out the settlement of “digital assets and currencies” on a network that annually carries more than 5 billion financial messages

article-image

After Bitwise’s XRP ETF filing this week, one industry watcher notes: “Politics will determine whether this happens soon or in a few years”

article-image

Plus, a look back at some of the SEC’s biggest enforcement moves under Gurbir Grewal