(Bloomberg) — The correlation between Bitcoin and a gauge of U.S. technology stocks hit a two-year high, indicating that the equity market’s reaction to U.S. inflation data United due after Wednesday can set the tone for digital tokens.
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A 30-day correlation coefficient for the largest cryptocurrency and the Nasdaq 100 Index is around 0.70, data compiled by Bloomberg shows. A reading of 1 indicates that the axes are moving in lockstep, while minus 1 signals an inverse link.
The inflation report is expected to show firm price pressures as markets worry about the Federal Reserve’s aim for further interest rate cuts amid a robust US economy and uncertainty about the impact of Donald Trump’s agenda.
Bond yields and the dollar have risen against that background, while stocks and crypto have been under pressure. Bitcoin changed hands at $97,000 as of 6 a.m. Wednesday in London, about $11,300 below last month’s record high.
Inauguration of Trump
President-elect Trump will be sworn in on January 20 and may launch a political blitz. Speculators weigh the risk of inflationary tariffs and immigration policies against their commitment to make the United States the global home of crypto.
“The overall sensitivity to interest rates over the past month suggests an increased importance of Wednesday’s CPI print,” K33 Research analysts Vetle Lunde and David Zimmerman wrote in a note. “Furthermore, a remarkable Trump moment may also be formed in the days leading up to the inauguration.”
Hedging activity has picked up in the options market, signaling that investors are positioned for increased volatility, according to trading platform Derive.xyz.
The proportion of bearish bets has increased, pointing to “hedging against potential downside risks as we approach the inauguration,” said Derive.xyz’s head of research, Sean Dawson.
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2025-01-15 06:04:00
