Stocks Soar to Records as Crypto Trails and Volatility Rises
U.S. equities hit new highs Monday, leaving major cryptocurrencies lagging. The S&P 500 climbed to 6,519 points, marking a fourth consecutive record, while the Nasdaq also reached all-time highs. The Dow Jones traded near last Thursday’s peak, reflecting a risk-on market sentiment.
Equities ignored a weak September manufacturing survey as bond yields fell ahead of a widely expected 25-basis-point Federal Reserve rate cut on Wednesday. Fed funds futures indicate traders expect rates to drop from 4.25% to 3% over the next year, bolstering investor confidence.
Bitcoin and Crypto Struggle
Bitcoin (BTC) traded between $114,000 and $117,000, forming an indecisive Doji candle. At the time of writing, BTC was at $115,860, still below August’s record highs above $124,000. Analysts cite profit-taking by long-term holders offsetting bullish ETF inflows.
Other major tokens also lost momentum. Ether (ETH) fell from nearly $4,800 to $4,500 after hitting $5,000 highs last month. XRP dropped to $3.00 following a weak breakout, while Dogecoin (DOGE) slid to $0.267 from $0.307 amid whale selling reports.
Analysts note that a 25-basis-point rate cut could support gradual BTC gains, while a surprise 50-bps move might trigger sharp volatility across equities, crypto, and gold.
Volatility Signals
The VIX, measuring expected S&P 500 volatility, rose 6% to 15.68 points. Historically, S&P 500 and VIX move inversely, but a breakdown in this correlation can precede corrections. Menthor Q highlighted that Monday’s rise could signal stretched positioning as traders hedge with calls and puts.
Bitcoin’s 30-day implied volatility also rose 3%, maintaining its correlation with VIX, though BTC’s relationship with volatility indices has shifted negative since spot ETFs launched in January last year.
