SOL Keeps Shining as Signs of Market Exhaustion Remain Absent
Market Prices in Rate Cuts
The key macro event this week was the release of the October CPI data, which came in notably cooler than anticipated. The year-over-year CPI was slightly lower at 3.2%, just below the predicted 3.3%, while the month-over-month figure remained steady at 0.0%, in contrast to the expected 0.1%.
This cooler inflation data spurred a surge in equity indices. It also bolstered investor confidence in the Federal Reserve's policy direction, hinting at a possible end to the ongoing series of rate hikes. As a result, the market has begun to factor in potential rate cuts, possibly as early as May.
Crypto had a muted reaction to the shifting interest rate dynamics. Many were surprised to see this transpire, but as we noted in our FlashInsight on Tuesday, this phenomenon can largely be attributed to a breakdown in the short-term correlations that cryptoassets previously shared with broader macro factors.
Current correlation metrics with technology stocks and the U.S. dollar are minimal, hovering around or at zero. This detachment highlights a significant shift from the patterns observed in 2022, where daily linkages to macro trends were more pronounced.
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