Investing.com-- Bitcoin rebounded on Thursday, recouping a bulk of its recent losses after the Federal Reserve kept interest rates on hold as widely expected, although traders still remained cautious amid volatile markets.
Sentiment was aided by Tesla (NASDAQ:TSLA) stating that it had clocked a gain of around $600 million on its Bitcoin holdings, although it was largely due to a change in accounting regulations.
Crypto markets were nursing more than a week of increased volatility, as traders fretted over U.S. President Donald Trump’s plans for friendlier regulation, as well as his plans for more trade tariffs on major economies.
Global sentiment towards risk-driven assets improved mildly as Wall Street recovered some ground from a steep sell-off in technology stocks on concerns over a new Chinese artificial intelligence program. U.S. stock index futures rose in Asian trade on Thursday.
Bitcoin rose over 3% to $105,020.0 by 08:58 ET (13:58 GMT).
Fed holds rates, near-term cuts appear unlikely
Markets took mixed cues from the Fed, which kept rates steady as widely expected at the conclusion of a meeting on Wednesday.
Fed Chair Jerome Powell said that the central bank was in no hurry to cut interest rates further, amid concerns over sticky inflation signs of resilience in the U.S. economy.
Powell also reiterated the bank’s independence from politics, amid multiple calls from Trump that the Fed cut interest rates further.
While markets took some relief from Powell’s comments, the prospect of rates remaining high for longer presents more near-term pressure on speculative assets such as crypto.
Tesla marks up Bitcoin holdings
Elon Musk’s Tesla marked up the value of its Bitcoin stockpile on Wednesday when reporting its fourth-quarter earnings.
The mark-up came following a new accounting rule that allows digital asset holders to mark-to-market their assets every quarter.
The company’s stockpile of 9,720 Bitcoin is now valued at $1.07 billion, much higher than the carrying value of $184 million seen for the past few years. This also factored into a $600 million net income increase for Tesla.
The mark-up came amid a sharp increase in Bitcoin’s price over the past two years. But it also followed a recent policy change from the Financial Accounting Standards Board, which now mandates digital assets held by corporates should be marked to market each quarter.
But despite the Bitcoin boost, Tesla’s earnings largely underwhelmed for the fourth quarter.
Bitcoin most correlated with the Russell 2000 tech stocks
JPMorgan analysts said that Bitcoin is most closely linked to small-cap tech stocks, particularly the Russell 2000 tech sector.
"This is true with both bitcoin and altcoins (i.e., crypto ex-bitcoin), although the correlation is on average higher with the former," analysts led by Nikolaos Panigirtzoglou wrote in a report. They noted that crypto’s stronger correlation with smaller tech stocks "makes sense due to the crypto reliance on VC and due to blockchain/crypto technological innovation typically being the focus of smaller rather than the largest tech companies."
The report follows Monday’s simultaneous sell-off in US tech stocks and cryptocurrencies, prompting analysts to revisit the crypto-equity correlation. They found that the relationship has remained structurally positive since the pandemic, driven by retail investor participation and the tech-driven nature of both sectors.
JPMorgan's analysis shows this correlation fluctuates over time, peaking during major tech sector shifts. "This pattern supports the idea that crypto is fundamentally linked to tech and when the tech sector is subjected to a more significant reassessment by equity investors," the analysts said.
Crypto price today: altcoins rise, $TRUMP slightly up
Broader crypto prices tracked gains in Bitcoin, with Ether jumping more than 5% at $3,261.38, while XRP rose slightly to $3.094. Bigger gains were still stymied by increased market caution.
$TRUMP- a memecoin launched by the U.S. President earlier in January, also saw slight gains after wiping out about 60% of its value from a post-launch peak.
Cardano, Solana, and Polygon rose between 4% and 6%, while Dogecoin added 2.6%.
Ambar Warrick contributed to this report.