Bitcoin And Crypto Benefit From Bullish Sentiment In Equities Market

Crypto bulls are looking to extend gains recorded in the first half of the year with positive signals trickling in from bonds and the equities markets. 

The correlation between the crypto and the stock market led to many observers predicting a decline in prices following macroeconomic factors that plagued the scene in 2022.

However, present realities are in sharp contrast with slowing inflation and the Feds signaling a pause on the previous interest rate hikes.

Overall, both markets have touched highs this year as they recover from the turmoil of 2022. Market leader Bitcoin (BTC) which lost over 55% of its value last year has gained 80% this year as institutional money flows in. 

Despite a poor start to the year due to interest rate hikes, tech stocks have been on a roll in recent weeks with tech-driven Nasdaq tapping a 52-week high on July 12.

Notably, the Artificial Intelligence (AI) craze has fueled the bullish sentiment in the equity market with seven stocks including Google, Amazon, Nvidia and Apple making up 55% of NASDAQ 100 and 27% of the S&P 500.

Just seven stocks make up 55% of the NASDAQ 100 and 27% of the S&P 500

The distribution has become so lopsided that the NASDAQ will be rebalancing to give these megacaps less weight.

Source: @GoldmanSachs pic.twitter.com/k1xM1wmL2S

— Markets & Mayhem 🤖 (@Mayhem4Markets) July 13, 2023

Market analyst Lyn Alden explained that liquidity in the bonds market will have a positive impact on crypto and other liquidity-driven assets. 

“But then some things began to change at the start of Q4 2022. The U.S. Treasury began dumping liquidity back into the market and offsetting the Fed’s quantitative tightening, and the dollar index declined. The S&P 500 found a bottom and began stabilizing. The liquidity in sovereign bond markets began easing. Various liquidity-driven assets like bitcoin turned back up.”

Interest rates pause to propel bullish run

Bulls have been in a frenzy since the Feds paused the hike in interest rates after previous consecutive increases in past months. 

The price of Bitcoin has also gained momentum from increased liquidity as well as a renewed institutional interest in the asset. Hikes in interest rates lead to slow market growth as investors tend to move funds away from high-risk assets. 

With the US market on the cusps of a spot Bitcoin Exchange Traded Fund (ETF), coupled with the next BTC halving, experts have predicted an upward trend in the price of Bitcoin. 

Aside from favorable interest rates and the equities market, recent events like Ripple’s (XRP) partial win against the Securities and Exchange Commission (SEC) have propelled a bullish sentiment. 

The price of XRP has maintained a seven-day surge of over 58.92% while other altcoins like Cardano (ADA), Solana (SOL), and Dogecoin (DOGE) have recorded a 6.17%, 16.63%, and 6.40% respectively.