Bitcoin price more correlated to FTX developments than macro events: Research
3 min read
The recent events surrounding the collapse of FTX had a greater impact on the price of Bitcoin (BTC) in the fourth quarter compared to macroeconomic factors such as interest rate hikes, according to a recent study by Messari.
In the “State of Bitcoin Q4 2022” report released on February 10, research analysts Sami Kassab and Chris Collar found that the fall of the exchange was a key contributor to a 25% drop in the value of Bitcoin. The findings highlight the significance of crypto exchanges in shaping the market and the importance of their stability in ensuring the health of the crypto ecosystem.
How did #Bitcoin fare in Q4 22′ in the wake of unfavorable macro and crypto environments?
+FTX collapse caused a 25% swing, affecting centralized entities/exchange balance
+Annual performance down 64% following halving trend
+Active Addresses increased 2% QoQFull report pic.twitter.com/6hhSqNEVbr
— Messari (@MessariCrypto) February 10, 2023
The latest report by Messari research analysts has shed light on the impact of macroeconomic events on the price of Bitcoin. According to the report, changes in the federal funds rate had a relatively minor impact on the cryptocurrency, even after two hikes of 75 and 50 basis points.
The report also highlighted a notable trend in the crypto market, as active wallets increased by 2% compared to the previous quarter. This shift was attributed to the movement of Bitcoin from centralized exchanges to self-custodial wallets during the period.
These findings align with the conclusions of a recent research paper from the Federal Reserve Bank of New York. The paper, released on February 8, analyzed the relationship between macroeconomic news and the price of Bitcoin and found that inflation was the only variable that had a significant impact on the cryptocurrency.
“Unlike other asset classes, Bitcoin is orthogonal to monetary & macroeconomic news.” – NY Fed
Even the Fed sees bitcoin growing less sensitive to the macro backdrop as its liquidity expands.
The maturation from speculative risk asset to base layer monetary good is underway https://t.co/9ACRAg78Hi
— Joe Consorti ⚡ (@JoeConsorti) February 8, 2023
The authors of the research paper, Gianluca Benigo and Carlo Rosa, have delved into the impact of macroeconomic news on various asset classes by compiling data from January 2017 to December 2022.
The study considered a wide range of macroeconomic news categories, including inflation, real-economy indicators, monetary policy updates, and forward-looking indicators.
The authors expressed surprise at their findings, concluding:
“The key result is that, unlike other U.S. asset classes, Bitcoin is orthogonal to monetary and macroeconomic news. This disconnect is puzzling as unexpected changes in discount rates should, in principle, affect the price of Bitcoin even when interpreting Bitcoin as a purely speculative asset.”
According to data from Yahoo Finance, Bitcoin has increased by just under a third, moving from $16,557 to $21,888. This impressive performance highlights the cryptocurrency’s potential as a viable investment option and its ability to navigate the complexities of the current economic landscape.
Despite the rapid pace of interest rate hikes by the U.S. Federal Reserve, Bitcoin has had a tremendous start to 2023, with a near one-third rise in value, as reported by Yahoo Finance. The cryptocurrency has gone from $16,557 to $21,888.
