The report, written by Babel Finance analysts Robbie Liu and Yuanming Qiu, arrived at its conclusions by looking at the market reaction in regards to various assets during three interest rate announcements in the US this year: on May 4, March 16, and January 26.
The moderating effect bitcoin had was better than that of other digital assets such as Ethereum’s native ETH token, and the effect was clear despite BTC being closely correlated with traditional assets such as the US S&P 500 stock index, the report said.
Overall, Bitcoin’s performance on the above-stated dates demonstrates the asset’s ability to “better moderate the economic impact of monetary events in comparison with the U.S. stock market and ETH,” the researchers wrote.
As a possible explanation for this, the report pointed to the fact that “a significant proportion” of bitcoin holders have always had confidence in the asset’s “store-of-value properties and inflation-hedging narrative.”
As a result, a larger proportion of Bitcoin holders are choosing to hold on to the asset, even as other risk assets crash, the report said.
Interest rate announcements and their impact on BTC:
Notably, the moderate reaction in the Bitcoin market came despite the fact that the digital asset has mirrored the US stock market “to an unprecedented degree” since May 2020.
According to the report, 30-day correlations reached almost 0.8 on May 6 of 2022 – the highest correlation since July 2017.
In terms of what to expect going forward, it is still uncertain whether bitcoin has reached the bottom of the current bear cycle, the report said.
“Some analysts are looking for signs of a Bitcoin bottom,” but this report is “not answering whether ‘buy the dip’ is now a good bet,” the authors wrote.
Instead of attempting to predict a bottom for bitcoin, the report made it clear that the digital asset’s store-of-value property “does not entirely diminish” even though its price falls and its correlation with other risk assets remains high.
“As always, Bitcoin’s long-term narratives would not be easily undermined by another price collapse. ‘True believers’ are still building there,” the authors concluded.