The bond and equity markets are sending positive signals to the crypto bulls, which will help them extend their gains during the first half of this year.
Many observers predicted a price decline following the macroeconomic factors which plagued the scene 2022.
The Fed has signaled a pause in the rate increases and inflation is slowing down.
Both markets are recovering from the turmoil that occurred in 2022. The market leader Bitcoin (), which lost more than 55% of its worth last year, has gained over 80% in value this year due to institutional money flowing into the market.
Tech stocks are on a tear in recent weeks, despite a bad start to the year because of interest rate hikes. The Nasdaq, which is heavily tech-oriented reached a 52-week-high on July 12.
The Artificial Intelligence (AI), craze, has fueled the bullish market sentiment. Seven stocks, including Google, Amazon Nvidia, and Apple, make up 55% of the NASDAQ 100, and 27% of S&P 500.
Market analyst Lyn Alden said that the liquidity of the bond market would have a positive effect on crypto and other assets that are liquidity-driven.
But then, at the beginning of Q4 2020, some things started to change. The dollar index fell as the U.S. Treasury started dumping liquidity into the market to offset the Fed’s quantitative tightening. The S&P 500 reached a bottom, and started to stabilize. Liquidity in the sovereign bond market began to ease. Bitcoin and other assets that are based on liquidity have risen.
Bullish market paused by interest rates
Since the Feds stopped the interest rate hikes after the previous consecutive increases, bulls have been in frenzy.
Bitcoin’s price has gained momentum due to increased liquidity and renewed interest from institutions in the asset. Increases in interest rates slow down market growth, as investors move their funds away from risky assets.
Experts have predicted that the price of Bitcoin will rise as the US market is about to launch a Bitcoin Exchange Traded Fund.
Recent events, such as Ripple (XRP)’s partial lawsuit against the Securities and Exchange Commission have fueled a bullish mood.
XRP’s price has maintained a 7-day increase of more than 58.92%, while altcoins such as Cardano (ADA), Solana(SOL), or Dogecoin(DOGE) recorded a 6.17% rise, 16.63% and 6.40%, respectively.