The price of Bitcoin put in another positive performance over the last seven days, looking to end the month and start October on an even stronger footing. Continuing its resurgence over the past few weeks, the premier cryptocurrency climbed as high as $66,000 on Friday, September 27th.

Recent data shows that there might be a growing correlation between the performance of the US stock market and the value of the world’s largest cryptocurrency. The question here is — how could this influence the behavior of investors?

How Did Bitcoin And S&P 500 Perform In September?

In a recent post on the X platform, crypto intelligence firm IntoTheBlock revealed the correlation between the Bitcoin price and the S&P 500, one of the most popular stock market indices, has reached its highest point in more than two years. For clarity, the S&P 500 index tracks the performance of 500 of the largest exchange-listed companies in the United States.

The Bitcoin price registered a surprisingly positive performance in September, a month known to be historically bearish for the flagship cryptocurrency. According to data from CoinGecko, the value of BTC is up by more than 11% in the past month.

Source: IntoTheBlock/X

Meanwhile, the S&P 500 index has undergone a quick and strong recovery, printing a new all-time high after an initial slump at the beginning of the month. Data from TradingView shows that the index is up almost 4% in September. 

The relationship between the stock market and the cryptocurrency market has always been intriguing, as investors look to take advantage of opportunities either market offers. Nevertheless, a strong correlation between these two asset classes is deemed to narrow the diversification opportunities they offer to investors.

As of this writing, Bitcoin price stands around $66,024, reflecting a mere 1.1% increase in the past 24 hours. Meanwhile, the S&P 500 Index continues to hover around 5.8K, with a 0.4% rise in the past day.

Global Liquidity Surges By $1.426 Trillion In A Week

Popular crypto pundit Ali Martinez took to the X platform to share that there has been a notable surge in the volume of capital in the global financial markets. Data provided by Martinez shows that global liquidity jumped by $1.426 trillion in the past week.

Global liquidity surged by $1.426 trillion this week, hitting $131.6 trillion. #Bitcoin and other risk assets are gaining, though this liquidity boost could roll over into October. pic.twitter.com/PtFDjkR7wU

— Ali (@ali_charts) September 27, 2024

Bitcoin and other risk assets have been the major beneficiaries of the rising global liquidity, as their values have gained due to the increased capital influx. Martinez also noted that this liquidity boost could roll over into October.

The price of BTC breaks above $66,000 on the daily timeframe | Source: BTCUSDT chart from TradingView

Featured image from iStock, chart from TradingView

Bitcoin and Ethereum ETFs (exchange-traded funds) recorded the highest multi-week inflows in the session ending Friday, September 27. This comes amid ongoing chatter about the crypto market’s recovery.

With a track record of less-than-desirable returns in September, given it has historically been Bitcoin’s worst-performing month, markets anticipate better fortunes in October as the month nears its end.

Crypto ETFs Inflows At Multi-Week Highs

Crypto investors bought 7,526 Bitcoin (BTC) and 22,310 Ethereum (ETH) on Friday, resulting in net inflows of $494.4 million and $58.7 million for Bitcoin and Ethereum ETFs, respectively.

Spotonchain, an on-chain insights tool, reported that these inflows catapulted total weekly flows to levels last seen weeks ago. Specifically, Bitcoin (BTC) ETFs recorded a total of $1.11 billion in positive flows, marking the largest weekly inflow since July 19.

On the other hand, Ethereum (ETH) ETFs had up to $84.6 million in total inflows between Monday and Friday, the largest weekly inflow since August 9.

Read more: How To Trade a Bitcoin ETF: A Step-by-Step Approach

Data from Farside Investors corroborates the report. It shows BlackRock’s IBIT ETF led the inflows daily, save for Monday, where it recorded $11.5 million, against Fidelity’s FBTC, which recorded $24.9 million in positive flows.

Since their debut in the US market in January 2024, spot Bitcoin ETFs have been a magnet for institutional investors. They offer direct portfolio inclusion of Bitcoin, bypassing the challenges of direct purchase and secure storage.

As BeInCrypto reported, more than 1,000 institutional investors signed on within just two 13F filing periods. This highlights how the market’s response to BTC ETFs has been overwhelmingly positive.

Meanwhile, in the ETH ETF market, all issuers are struggling as the financial instrument continues to underperform. Nevertheless, mustering positive flows for both markets is not easy.

It comes as investors continue to bet on crypto market recovery, with Bitcoin holding well above $65,500.

Bitcoin price strength is closely tied to broader economic indicators that suggest a rise in liquidity. Such a turnout often benefits Bitcoin due to its sensitivity to liquidity changes. For starters, China is considering fiscal aid for its citizenry amidst a struggling economy. Similarly, the US Federal Reserve recently cut interest rates, which often bodes well for risk-on assets.

Various economists have commented on the rising liquidity, including macro researcher Julien Bittel.

“Liquidity is on the rise again, and Bitcoin – being extremely sensitive to changes in liquidity conditions – has the potential to move explosively as fresh liquidity flows into the system. The macro environment is shifting. A major liquidity wave is now on the horizon, and when it hits, Bitcoin looks primed for a strong push higher in Q4,” Bittel said.

Similarly, the Global Money Index (GMI) also shows rising liquidity. This metric measures the volume of money in circulation among consumers and banks.

Read more: Bitcoin (BTC) Price Prediction 2024/2025/2030

An increase in the GMI typically signals more funds circulating and ready for spending. This could lead to increased Bitcoin purchases.

The Federal Reserve left the door open for further interest rate cuts, and China has enacted cuts of its own. Bitcoin experts are bullish towards the future, but some uncertainty remains.

The next few weeks will be critical for Bitcoin’s growth.

Rate Cuts Worldwide

Officials from the Federal Reserve are open to further rate cuts. The first round of cuts does not appear to have many outright political opponents, leaving the door wide open for more. As Neel Kashkari, President of the Federal Reserve of Minneapolis, put it:

“Even after the 50 basis-point cut, I believe the overall stance of monetary policy remains tight. I was comfortable taking a larger first step, and then as we go forward, I expect, on balance, we will probably take smaller steps,” he claimed.

The US is not the only major world player to take similar steps. On Monday, China also implemented rate cuts alongside several other measures, such as injecting over $10 billion in liquidity into its central bank. In other words, the economic fallout from US rate cuts is not localized, and the market conditions may only intensify.

Read More: TradFi Explained: Exploring Key Elements of Traditional Finance

Impact on Bitcoin

For some, this is a concerning possibility. Wall Street strategist Ed Yardeni, for example, was extremely bearish. In an interview, he warned of an “outright melt-up” in the stock market, claiming that there is a slim but non-negligible chance of an economic downturn.

He predicted a roughly 80% chance of a bull market and a 20% chance of downturns. Bitcoin’s own experts are overall more bullish, but some slight reservations do remain.

“Let the good times roll,” Arthur Hayes claimed in an X post, noting that Bitcoin’s price held up over the weekend. This goes against his earlier skepticism that Bitcoin might not profit from cuts. A series of other experts expressed similar bullish sentiments in exclusive interviews with BeInCrypto, albeit with a few caveats.

For example, Harsh Agarwal, Investment Lead at Cypher Capital, noted that “Bitcoin stands to generate $145 billion in gains if it reaches $68,000”. Several bullish factors are aligned, he claimed, but that’s not a guarantee of success. Mithril Thakore, CEO & Co-founder of Velar, described these dynamics further:

“The Fed’s interest rate cut on September 18 appears to have shaken the crypto market from its stupor and given BTC the much-needed catalyst to think about retesting former highs. Before it can get there, though, $64,000 has proven to be a key resistance zone and it remains to be seen whether BTC can convincingly break through this barrier,” claimed Thakore.

In other words, there are plenty of bullish signs, but that doesn’t mean a bull market is absolute. The most critical period for Bitcoin is in the next few weeks, especially now that China has made its own cuts. Jonathan Hargreaves, Global Head of Business Development & ESG at Elastos, told BeInCrypto that this market is unique and may not match up with past cycles.

Read More: How To Buy Bitcoin (BTC) and Everything You Need To Know

“Importantly, the broader economy will be more interconnected with these developments, particularly regarding interest rate cuts and critical regulatory decisions in the US, India and China related to crypto governance. Choices such as aggressive interest rate cuts, taxation policy, and market access in China will significantly impact the peak and duration of this bull run”, Hargreaves told BeInCrypto.