Bulls seem to be dominating the supposedly risky corners of the financial market, with both the cryptocurrency and stock markets seeing a significant uptick. Bitcoin, the leading cryptocurrency, saw a massive rise of nearly 13.5% to $48,300 in just a week. At the same time, the CoinDesk 20 Index, which measures the biggest cryptocurrencies, climbed 11%. This rally comes as continued inflows into the U.S.-based spot bitcoin exchange-traded funds (ETFs) are making an impact on the market. Meanwhile, the S&P 500, Wall Street’s benchmark equity index, rose for the fifth week, closing above the $5,000 mark for the first time on record. While it’s unclear at this stage how sustainable this growth is, it could indicate a strong investor appetite for high-growth assets.
The continuation of an inflow of U.S.-based spot bitcoin exchange-traded funds may be overshadowing other news, such as reports of bankrupt crypto lender Genesis seeking approval to liquidate its $1.6 billion bitcoin holdings. The boom in artificial intelligence-related stocks, particularly in leading companies like NVIDIA, has been driving the index higher and, according to some experts, is contributing to the bullish momentum seen in the crypto market. This sentiment has also been echoed by Amberdata’s Director of Derivatives Greg Magadini, who believes that the investor risk appetite for tech is good for crypto and vice versa. This is evidenced by the fact that shares in NVIDIA, which are already up over 40% for the year, are leading the AI-led rally in stocks.
The rise in both the cryptocurrency and stock markets is contributing to a sharp drop in the equity risk premium, which signals that stocks are expensive and Treasury notes are cheap. According to Magadini, this measure also indicates that risk-on sentiment is very strong in the market, highlighting the growing bullish appetite for these high-growth assets. While some observers have expressed concerns that stocks are looking expensive, the current trend suggests that investors are favoring high-risk, high-reward opportunities.