According to a report by Coinbase Research, the cryptocurrency market has recently shown a strong correlation with traditional stock markets.
The correlation, which currently hovers around 50%, is due to global economic easing efforts in the US and China. These actions have had a positive impact on the crypto market, with Ethereum (ETH) outperforming Bitcoin (BTC) in recent days.
ETH has outperformed BTC over the past week, gaining 8%. Altcoins are also benefiting from the renewed interest among buyers, with key sectors such as Gaming, Scaling Solutions, and Layer-0 gaining 17%, 11%, and 9% respectively during the same period.
Cryptocurrency Market Enters Strong Phase, According to Coinbase Report
Coinbase’s report highlights several indicators that suggest the crypto market is entering a strong phase. Funding rates remain stable and open interest is at average levels seen over the past six months. According to analysts, these metrics suggest that the market is in a good position heading into October, which has historically been a favorable month for Bitcoin, which has risen during this period in 8 out of the last 10 years.
The company remains optimistic about the cryptocurrency market prospects as it looks ahead to Q4 2024. This positive outlook is based primarily on favorable macroeconomic conditions and industry-specific factors driving demand in the crypto space.
Coinbase also highlighted the impact of recent global economic policies, particularly in the U.S. and China. Last week, the Fed cut interest rates by 50 basis points, a move that was expected to create space for other central banks to implement more stimulus measures. Shortly thereafter, China announced a significant fiscal and monetary stimulus package that included a record-breaking rate cut, increased liquidity support for equities, and a lowering of the banking reserve requirement ratio.
This reduction in reserve requirements, which aims to increase lending and ease credit burdens in China, is particularly notable for its potential to increase market liquidity. Coinbase has previously found a positive correlation between increased liquidity and stronger BTC performance, but the report warned that there may be a lag before these policy measures fully translate into higher crypto prices.
Overall, Coinbase offers a positive outlook for the remainder of 2024, with the expectation that a combination of favorable macroeconomic trends and industry-specific growth will continue to support crypto performance.
*This is not investment advice.