Why is bitcoin rising against all odds?

Despite a worrisome macroeconomic landscape, bitcoin, stocks and other equities are posting gains on the week so far.

The moves are surprising given the recent hawkish stance of the Federal Reserve, which has been firm all year in its commitment to raising interest rates. Risky assets such as stocks and crypto typically suffer from such moves, but the Fed has shown little indication that it is willing to slow down.

Now, somewhat ironically, investors seem to see signs of weakness in the U.S. economy (e.g., today’s Bureau of Labor Statistics report showing a drop in job openings (from 11.2 million to 10.1 million) as positive signs for the markets. The reasoning behind such a rise is that explicit signs of recession may force the Fed to reconsider its policies.

That hope was fueled yesterday by a call from a United Nations agency for the Federal Reserve to significantly slow or even stop its rate hikes. In a report released yesterday, the United Nations Conference on Trade and Development said the Fed’s aggressive rate hikes risk causing a recession, which would hit poor countries the hardest.

The so-called “Fed pivot” would be a welcome development for crypto-currency investors, at least in the short term. Observers have feared throughout the year that the Fed’s aggressive rate hikes would tip a QE-inflated economy into a full-blown recession. Nonetheless, all indications are that the Fed intends to stay the course, with Chairman Jerome Powell warning in August of the risk of “pain” forward.

Bitcoin’s daily gains stand at a modest 3.64% as of this writing; the rebound is nonetheless refreshing in a brutal and long-lasting bear market. Indeed, while stocks are also up today, last week’s stock market collapse barely affected bitcoin. This has given weight to the oft-cited theory that Bitcoin could one day decouple from the performance of stocks, but the markets will need to produce much more data before such a trend can be verified.