[Bitcoin Now] Up Amid Bank of Canada’s Tapering Pace Adjustment... Closer to Stock Market Than Gold

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] The price of Bitcoin, the leading cryptocurrency, is showing strength as the Bank of Canada slowed its pace of tightening contrary to expectations. Ethereum, the leading altcoin, rose more than 7%.

According to the global cryptocurrency market tracking site CoinMarketCap, as of 9:18 a.m. on the 27th, Bitcoin was priced at $20,811 (approximately 29.45 million KRW), up 3.60% from the previous day. Ethereum, the leading altcoin, recorded a 7.72% increase to $1,573 (approximately 2.23 million KRW).

Cryptocurrency prices rose as the Bank of Canada raised its overnight rate target by only 0.5 percentage points, despite expectations of a giant step (a 0.75 percentage point hike in the benchmark interest rate at once). The Bank of Canada had raised rates by 1 percentage point in July and 0.75 percentage points in September but reduced the rate hike this time contrary to expectations.

Immediately after the announcement, cryptocurrency media CoinDesk reported that Bitcoin prices rose 7.5% compared to the previous day. CoinDesk also stated, "As the Bank of Canada raised interest rates less aggressively than expected, Bitcoin prices briefly surpassed $21,000, continuing the recent surge despite weak earnings from Alphabet and Microsoft (MS)." Edward Moya, senior market analyst at global investment firm OANDA, explained, "Bitcoin prices are comfortably above the $20,000 level and will attempt to stabilize until the November Federal Open Market Committee (FOMC) meeting. If the appetite for risk assets remains, it could rise to around $22,500."

Furthermore, contrary to the analysis that views Bitcoin as a safe-haven asset, it has recently shown movements closer to the Nasdaq index. Earlier, Bank of America (BoA) stated, "The correlation between Bitcoin and risk assets such as the S&P 500 and Nasdaq indices has gradually decreased recently," adding, "More investors are viewing Bitcoin as a safe-haven asset." There was also analysis that the correlation between Bitcoin and gold, a representative safe-haven asset, is increasing.

However, since the 20th of this month, cracks have appeared in these relationships. Except for the 26th (local time), when the U.S. stock market showed weakness due to weak earnings from Alphabet and MS, Bitcoin showed greater synchronization with the Nasdaq index than with gold.

The Nasdaq index rose from 10,614.84 on the 20th to 11,199.12 on the 25th. Bitcoin prices increased from $19,042 to $20,082, rising 5.50% and 5.46%, respectively. Meanwhile, December gold futures prices on the New York Mercantile Exchange also showed an upward trend but with a smaller increase, rising 1.23% from $1,636.80 to $1,657.00 per ounce.