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Federal Reserve Cuts Rates to 0% as Bitcoin Follows Stocks

As the Fed cuts rates again, Bitcoin is failing to show its lack of correlation to traditional markets.

Crypto Markets Rise And Fall In Unison As Correlation Among Altcoins Increases

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The Federal Reserve has cut its benchmark interest rate to zero in a bid to revive the American economy amidst growing Coronavirus fears. Meanwhile, Bitcoin is trading in lockstep with the US stock market as correlation between the two reaches an all-time high. 

Crashing Economy, Crashing Bitcoin

Sentiment and activity in the global economy are at a 10-year low. 

From 2008 to 2016, the American central bank kept benchmark rates at 0% to incentivize businesses and households to take credit and boost the economy. 

After gradually raising rates for the last four years, the Federal Reserve has announced that they’ve cut rates to 0% again. The central bank will buy $700 billion worth of bonds – $500 billion of Treasuries and $200 billion of mortgage-backed securities – to provide institutions with much-needed liquidity. 

The S&P 500 may already have this rate cut priced in as it surged 9.3% last Friday. 

The probability of a recession in the United States has also increased by 50% in the last two weeks, per Bloomberg Economics
Source: Bloomberg

Bitcoin is now trading with a correlation of 0.5 to the S&P – its highest correlation ever.

The correlation indicates macro investors still see Bitcoin as a speculative investment and are ditching it for safer investments as uncertainty ramps up. 

Source: CoinMetrics

Although the leading cryptocurrency performed similarily to a risk-off asset during the conflict between the United States and Iran, Bitcoin’s safe haven narrative has so far failed to shelter HODLers in the latest macro downturn.

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