Bitcoin (BTC) is the best asset to “control for the economic impact” of major interest rate announcements, according to a new report from Babel Finance, a crypto financial services provider.
The report, written by analysts Robbie Liu and Yuanming Qiu of Babel Finance, reached its conclusion by looking at the market reaction in relation to various assets during the three US interest rate announcements in the past three months. this year: on May 4, March 16 and January 26. .
The censorship effect of bitcoin is better than that of other digital assets such as Ethereum’s native ETH token, and the effect is clear even though BTC is strongly correlated with traditional assets such as Bitcoin, the report said. US S&P 500 stock index, the report said.
Overall, Bitcoin’s performance on the dates mentioned above demonstrates the asset’s ability to “better control the economic impact of currency events than the US stock markets and ETH”, the analysts said. writing research.
To possibly account for this, the report pointed to the fact that “a significant proportion” of bitcoin holders consistently believe in a “store of value and inflation hedge narrative.” .
As a result, a large percentage of Bitcoin holders are choosing to hold onto the asset, even as other risky assets crash, the report said.
Interest rate announcements and their impact on BTC:
Notably, the dovish reaction in the Bitcoin market comes despite the fact that the digital asset has mirrored the US stock market “to an unprecedented degree” since May 2020.
According to the report, the 30-day correlation reached nearly 0.8 on May 6, 2022 – the highest correlation since July 2017.
As for what will happen in the future, it is still uncertain whether bitcoin will reach the bottom of the current bear cycle, the report said.
Some analysts are looking for signs of a Bitcoin bottom, the authors write, but this report “does not answer whether ‘buying down’ is a good bet.”
Rather than trying to predict bitcoin’s bottom, the report clarified that the digital asset’s store of value “doesn’t fully decline” even as its price declines and its correlation with other assets does. Other risky assets are still high.
“As always, Bitcoin’s long-term narratives will not be easily destroyed by another price crash. The authors conclude that ‘true believers’ are still building there.