In addition, Jerome Powell acknowledged that the prospects of a soft landing are diminishing as the Fed’s top priority remains to restore price stability, suggesting that a recession cannot be ruled out. This scenario could, of course, have catastrophic consequences for risky assets such as cryptos.
Stocks vs Cryptos
While the correlation between Bitcoin and stock markets is currently at an all-time high, the broader crypto space not only outperformed but also moved massively against stock indices on Thursday. However, it is too early to argue for a correlation break, as the immature nature of crypto markets is often responsible for some wild swings.
First, major events, such as the FOMC meeting, often trigger overreaction in crypto markets, due to the relative inexperience and lack of expertise of their participants. Therefore, these spikes tend to return faster than the moderate reactions in the stock space. In addition, cryptocurrencies are currently trading closer to their 2022 lows than equities, so any declines face firm support at buy the dip levels, when the downside potential for equities is actually greater.
Systemic misery resurfacesIn 2022, the crypto market crash has continuously exposed shortcomings and failures in various cryptocurrency projects and business models, dealing significant blows to the reliability of the broader crypto space. While these phenomena have subsided lately, new scandals have cropped up in the blockchain world.