One key aspect of market efficiency is its ability to react instantly to major events, particularly in cryptocurrency and foreign exchange (FX).
Whether it’s a sudden tariff announcement or a tweet
from a high-profile political figure, these markets adjust in real-time, often
showing remarkable similarities in their speed and depth.
This is according to a recent study by LMAX Group, dubbed Millisecond Reactions to Market Shocks, which highlighted how quickly markets respond to major global events. The report compared the real-time movements of cryptocurrency and FX
markets.
BTC/USD and EUR/USD
Key events such as Federal Reserve rate decisions,
political announcements, and even fake news headlines have demonstrated how
both markets can react almost instantaneously, with moves often measured in
milliseconds.
“Our previous report in November 2024 highlighted the pace
at which FX markets—the most liquid market in the world—price in key
information immediately following US macroeconomic data releases,” commented Bilal Hafeez, the CEO and Head of
Research at MacroHive, and the co-author of the report.
“Our latest findings show BTC’s correlation to FX
markets, the depth of markets even around political events like Trump’s social
media posts. The results emphasise the need for traders to have access to
high-frequency data and liquidity, commented Bilal Hafeez, the CEO and Head of
Research at MacroHive, and the co-author of the report.
For instance, examining price fluctuations just
seconds after a Fed decision or a political tweet shows a significant portion
of the market’s price action, often allowing for predictive insights that can
inform future trades.
An in-depth look at the Fed’s rate decisions reveals
that both BTC/USD and EUR/USD markets respond almost immediately after the
announcement.
Interestingly, while both markets exhibit similar
patterns of initial reaction, their volatility levels differ. Cryptocurrencies
like Bitcoin tend to experience higher volatility compared to traditional FX
pairs like EUR/USD.
This distinction highlights the different nature of
these asset classes: while broader economic indicators influence FX markets, crypto markets are often more sensitive to sentiment and news,
leading to larger price swings.
You may also like: Bitcoin, Ethereum, XRP Surge As Fed Holds Interest Rates Steady
Political Events and Their Market Impact
Political events, particularly those linked to the
actions of influential figures like US President Donald Trump, have a profound
effect on markets. One such instance was Trump’s announcement on February 3,
2025, about pausing tariffs on Mexico and Canada.
“Clients are increasingly relying on quality data to drive
trading decisions across asset classes. We have leveraged on MacroHive’s
ability to analyse the markets to jointly release this report to offer unique
and predictive insights on the markets using millisecond LMAX Group FX and
cryptocurrency order book data,” added Arun Sundaram, the Head of Market Data,
LMAX Group, also a co-author in the report.
This kind of market movement highlights the level of
sensitivity in crypto markets to breaking news, even when the information later
proves to be false.
This article was written by Jared Kirui at www.financemagnates.com.
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