BTC and ETH flat, stocks lower as investors doubt rate cuts

Cryptocurrencies were mildly in the green and equities slipped Monday afternoon as investors grew more skeptical that the Federal Reserve will lower interest rates in March.

Bitcoin (BTC) and ether (ETH) gained around 0.4% and 0.6%, respectively, over 24 hours Monday afternoon in New York, both hovering just below highs from the weekend. Macroeconomic forces are playing into crypto prices, Zach Pandl, managing director of research at Grayscale, said, but net bitcoin ETF inflows are helping minimize negative price impact.

“it is important to note that bitcoin has been resilient over the last week despite higher US interest rates and a stronger US dollar,” Pandl said. “So far, bitcoin seems to be taking [Fed] guidance in stride — holding around $43,000 — as crypto markets focus on continued ETF inflows.”

The S&P 500 and Nasdaq Composite indexes posted sharp declines earlier in the trading session but both pared losses slightly and were trading 0.3% lower at time of publication. Monday’s decline comes after the S&P 500 and Dow Jones Industrial Average clocked record highs last week.

“This past week is one of the most conflicted and contradictory I’ve seen in markets in my nearly three decades in this business,” Tom Essaye, founder of Sevens Report Research, said.

Despite several recent layoff announcements, jobs data from January released last week showed an unexpectedly strong labor market, a trend Fed Chair Jerome Powell said likely means interest rates will remain elevated for longer.

On the one hand, recent manufacturing PMI suggests inflation may be easing, but the latest jobs data implies growth and inflation are on the rise, leaving analysts questioning whether a stock rally could be maintained.

“For all the noise and nuance in the market, this bullish mantra is still intact: No hard landing, Fed cutting rates sooner than later (by May), inflation declining, earnings growth holding up,” Essaye said. “For this rally to end, one of those four statements must be false and despite the nuance in last week’s data, none of it was enough to prove any of those statements false, and as such, the S&P 500 rallied to fresh all-time highs.”

Crypto-related equities were also on the decline Monday, with Coinbase and MicroStrategy losing down around 8% and 2%, respectively, at time of publication. Publicly traded mining operations Hut 8 Corp and Marathon Digital also trended about 5% and 7% lower, respectively.

MicroStrategy is scheduled to release its 2023 Q4 earnings report Tuesday and Coinbase has scheduled its call for next week. Hut 8 Corp and Marathon Digital plan to report in March.

Get the news in your inbox. Explore Blockworks newsletters:

The Breakdown: Decoding crypto and the markets. Daily.
Empire: Crypto news and analysis to start your day.
Forward Guidance: The intersection of crypto, macro and policy.
0xResearch: Alpha directly in your inbox.
Lightspeed: All things Solana.
The Drop: Apps, games, memes and more.
Supply Shock: Bitcoin, bitcoin, bitcoin.