Cryptocurrencies shares surged today as part of a broader market rally, one day after the Federal Reserve delivered a bumper interest-rate cut and promised more as inflation eases.
The first rate cut in more than four years triggered a rush into riskier assets and added to the sector's momentum, which has seen decent gains in 2024.
Bitcoin (BitfinexUSD) rose as investors shifted their portfolios amid expectations that the U.S. rate would fall another half-percentage point by the end of 2024.
While the dominant cryptocurrency initially spiked before pulling back as traders digested the news, the coin has since regained strength.
Stocks tied to the digital assets ecosystem followed suit. America’s largest cryptocurrency exchange, Coinbase Global Inc (NASDAQ:COIN), jumped 4.1%. MicroStrategy (NASDAQ:MSTR), the world’s largest corporate holder of bitcoin, ticked up 5%.
Crypto miners Riot Platforms (NASDAQ:RIOT), Marathon Digital (NASDAQ:MARA), and CleanSpark Inc (NASDAQ:CLSK) saw their shares rise by 5%, 5.8%, and 6.1%, respectively.
Bitcoin, known for behaving as both a hedge and a risk asset, is currently more correlated with the NASDAQ Composite than with traditional safe-haven assets like gold.
With money market funds now yielding 50 basis points less, investors are apparently betting that this low-interest environment could boost liquidity in the crypto sector. Others, however, focused on concerns that the size of the rate cut could signal greater economic worries than expected.
Earlier this year, the approval of exchange-traded funds tracking the spot prices of bitcoin and ether boosted investor sentiment in the crypto industry. However, market conditions had become more volatile in recent weeks as investors weighed political developments ahead of the 2024 U.S. presidential election.
Republican candidate Donald Trump explicitly supports bitcoin adoption, pledging to fire SEC Chair Gary Gensler if elected, a move favored by the crypto industry, which has often criticized Gensler’s enforcement policies.
Trump launched a new crypto venture earlier this week and made headlines yesterday by paying with bitcoin for burgers during a campaign stop in New York.