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Crypto Markets Evolving Amid Financial Shifts
Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!
This week, we discuss Bitcoin’s growing correlation with U.S. stock markets, driven by macroeconomic factors like the Federal Reserve policies. We examine Ethereum’s market performance, including rising fees, price increases, and funding rate shifts, while noting its struggles with traditional finance. Lastly, we explore ETF outflows and Bitcoin’s stronger investor sentiment, highlighting the evolving relationship between crypto markets and traditional finance.
Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether
- ETH fees saw a remarkable surge, reaching their highest level since early June 2024.
Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges
- Following a week of price gains, both assets saw modest inflows into exchanges, likely as users took profits.
Ethereum’s Mixed Market Signals
Last week, the U.S. Federal Reserve reduced interest rates by half a percentage point, which spurred growth across multiple markets, including the crypto sector. This week, the prices of BTC and ETH surged, surpassing $64,800 and $2,680, respectively. With one or two additional rate cuts anticipated and China rolling out new economic initiatives to spur growth, what future trends do analysts expect to unfold?
Both crypto and stock markets responded in nearly the same way, to the FED rate cuts. Many analysts interpret this as a sign that macroeconomic factors are the dominant influence on both markets at the moment. As a result, much attention is now focused on the U.S. central bank for any clues about its upcoming decisions.
IntoTheBlock’s Capital Markets Insights
BTC’s correlation with U.S. stocks has reached a two-year high, a level that was only surpassed in the second quarter of 2022.
- The People’s Bank of China (PBOC) lowered the reserve requirement for banks by 50 basis points, cut the seven-day reverse repo rate by 20 basis points to 1.5%, and reduced the minimum mortgage down payment to 15%.
- Bitcoin’s muted reaction to this news, in contrast to the rallying Chinese indices, suggests its current behavior is more closely aligned with Fed policy and U.S. markets.
- The Polymarket crypto betting platform predicts a 48% probability of a 25 basis point rate cut and a 45% chance of a 50 basis point cut at the November FED meeting.
In last week’s IntoTheBlock newsletter, we discussed ETH’s struggle relative to BTC, emphasizing that the ETH to BTC ratio had reached its lowest level since April 2021. Yet, following the Fed’s rate cut last week, this dynamic has entirely shifted.
IntoTheBlock ETH Indicators
From 59% to 66% — the percentage of addresses “in the money” rose as prices surged by over 7% in the past week.
- The volume, representing the amount of ETH purchased at a particular price level rather than the number of addresses, is currently 82% in profit.
- Even as prices climbed, Ether ETFs experienced their largest outflows since July, with over $79 million withdrawn on Monday.
- The outflow of ETFs points to a divergence between price movements and investor confidence in ether’s future outlook.
IntoTheBlock ETH Indicators
$45 million in weekly fees — this marks the highest level reached since the week of June 10th, 2024.
- Although Ether doesn’t captivate traditional finance investors like Bitcoin’s “digital gold” narrative does, its network activity and price figures have still seen notable improvements.
- Furthermore, the Ethereum derivatives market is also showing signs of renewed optimism, highlighted by a positive shift in the 30-day moving average of funding rates.
- This highlights how various sectors of the Ethereum blockchain have shown positive indicators, such as price growth, rising blockchain fees, and a shift in funding rates, even though the perception from the traditional finance market remains unchanged.
In conclusion, this discussion emphasized the growing link between cryptocurrency and traditional financial markets, especially with Bitcoin’s correlation to U.S. stocks amid macroeconomic factors like Federal Reserve policies. Ethereum’s performance showed positive developments such as rising fees and price gains, though it continues to face challenges in gaining traction with traditional finance. The exploration of ETF outflows and Bitcoin’s stronger investor sentiment further underscored the evolving and complex relationship between crypto markets and traditional finance.
Ethereum’s Mixed Market Signals was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.