US stock surge, led by strong corporate earnings, creates uncertainty in the crypto markets.
Investors scrutinize the Federal Reserve’s potential delay in interest rate reductions.
Amidst the record-breaking performance of the S&P 500, fueled by robust corporate earnings, the US stock market surge is not just elevating investor sentiments but also triggering uncertainty in the crypto markets. As corporate earnings take the spotlight, attention is shifting towards the Federal Reserve’s future trajectory, leaving crypto enthusiasts on the edge.
The surge in the US stock market, exemplified by the S&P 500 reaching historic highs, is largely attributed to the exceptional corporate performance this year. Despite concerns about the Federal Reserve’s move towards lower interest rates, the rise in stocks, backed by a projected 10% boost in fourth-quarter earnings for S&P 500 companies, has uplifted sentiments across various investment avenues, including the crypto market, which are often seen as alternative investments.
One of the highlights of the stock market was Nvidia’s earnings. Nvidia’s standout earnings report, revealing adjusted profits per share of $5.16 on $22.1 billion in revenue. This exceeded analysts’ projections of $4.60 EPS on revenue of $20.4 billion and highlighted the market’s strength.
This was a significant improvement from Nvidia’s $0.88 EPS on revenue of $6.1 billion in the same quarter last year. This remarkable performance, with $27 billion in sales throughout fiscal year 2022, adds a positive tone to the overall economic landscape.
Fed’s Plan Shift and Crypto Market Volatility
The Federal Reserve‘s potential delay in interest rate reductions, indicated by strong US data figures, is adding an element of caution to the crypto markets. The Fed has been signaling that it will lower interest rates to stimulate the economy, which has been hit by the COVID-19 pandemic. However, the recent data figures have shown that the US economy is recovering faster than expected, which could delay the rate cuts.
Traditionally, investors closely follow the Fed’s rate decisions, and the delay in rate cuts might lead to a prolonged preference for traditional assets over cryptocurrencies, causing increased volatility in the crypto space. The market is now pricing in a rate cut in June or July, instead of March or May, as previously anticipated.
A user on X said: We are now peaking at 12 months away from an economic recession. Feds are pushing back rate cuts each meeting.
According to CME’s “Fed Watch,” there is a 93.5% chance that the Federal Reserve will maintain interest rates unchanged in the 5.25%-5.50% range in March. The chances of a 25 basis point rate drop are 6.5%. Looking ahead to May, interest rates are expected to remain unchanged by 72.9%, while the possibilities of a cumulative 25 basis point rate drop are 25.6%, with a 50 basis point cut coming at 1.4%.
While the delay in rate cuts might impact cryptocurrency markets in the short term, the overall economic backdrop suggests a potential continuation of the current market trends.
Amidst the Fed rate cuts, Bitcoin price can reach as high as $150,000 this year, Fundstrat’s Tom Lee said.