Bitcoin and other top cryptocurrencies have posted modest gains since yesterday
Market experts, however, believe January’s equities market slump could be an indication of a looming larger correction
The crypto market is seeing a sense of stability on the first day of February after charting a recovery curve yesterday.
Bitcoin (BTC), Binance Coin (BNB) and Cardano (ADA) are all up by roughly 4% on the day, while Ethereum (ETH), Solana (SOL), Polkadot (DOT) and Terra (LUNA) have double-digit gains in the last 24 hours. Solana’s native coin is up by over 20%, while Terra’s coin LUNA has seen a price upswing of almost 19% in the same period.
Notwithstanding the green arrows in the market, industry experts maintain that the tide is not yet out as many market factors still hang in the balance.
The stock and crypto market tie-up could hurt the markets
Last month, the International Monetary Funds raised concerns about the increasing correlation between stocks and cryptocurrencies. The financial body apprised that the in-sync movement ‘limits their [crypto assets] perceived risk diversification benefits and raises the risk of contagion across financial markets.‘
Market analysts now contend that crypto investors should keep tabs on the stocks market as any movement could define the path crypto assets take.
Sevens Report Research founder Tom Essaye recently outlined that there are obstacles in the stocks market’s road to stability that need to be cleared for equities to recover.
“For stocks to stabilise and rebound, they need one, the Fed to stop providing hawkish surprises. Two, inflation data to peak and recede. And three, economic data to remain firm to eliminate thoughts of stagflation,” Essaye noted, adding that none had occurred.
The Federal Reserve’s recent announcement regarding plans to withdraw stimuli and hike interest rates already put the stocks market in a difficult position. Some analysts submit that the heightened volatility witnessed in January may continue.
“The stock market is especially vulnerable to higher rates and the removal of the tailwind that the Fed’s asset purchases have provided for the past two years. We […] are concerned that the volatility we have already witnessed this month will increase in the months ahead and would exercise caution in the near term,” Chris Zaccarelli, the CIO of Advisor Alliance, opined in response to the Fed’s decision.
Several analysts back the postulation that last month’s market tumble could be a harbinger of more losses to come. Though the Federal Reserve gave a fair heads up on the increased interest rates, it may not be enough to save the markets.
No one can point out the particular direction the crypto and stocks markets will take this month. However, many analysts agree that the stock market is not yet over the hump. Being the case, it is crucial that traders watch out as the volatility in equities could spell a similar move in the crypto markets.