Analysis of Recent Market Trends

Bitcoin is currently mirroring the cautious behavior of equity markets as investors await the release of the US Consumer Price Index (CPI) report and the Federal Reserve rate announcement.

Market observers believe that the US Federal Reserve is facing limited options, particularly after the substantial increase in May payrolls, which has diminished the probability of an initial rate cut in September.

Correlation Between Bitcoin and Equities

According to the CME's FedWatch tool, traders speculating on interest rates anticipate that the Federal Reserve may hold rates steady until November. The tool indicates a 47% likelihood that the Fed will maintain current rates during the Federal Open Market Committee (FOMC) meeting in September.

Before the latest CPI inflation report and the June FOMC meeting, US stock futures showed a slight decline. Dow Jones Industrial Average futures dropped by 0.38%, while S&P 500 futures were down by 0.23% in pre-market trading.

Major European and UK stock indices also experienced losses. In London, the FTSE 100 index decreased by 60.90 points to 8,167.58 during mid-day trading.

Bitcoin's Market Performance

Bitcoin, the leading digital asset by market capitalization, followed the downward trend of the sluggish equity markets. Over the last 24 hours, its value decreased by approximately 3.7%, trading at $66,797 at 7:12 a.m. ET.

Luuk Strijers, the CEO of Deribit, highlighted that Bitcoin is currently displaying a heightened correlation with risk-assets, such as gold. This correlation could lead to a risk-averse sentiment in the Bitcoin market, with investors exercising greater caution in anticipation of the US inflation figures and the FOMC meeting.

Traders are expected to adopt a more conservative approach, possibly reducing their exposure or implementing option strategies as a hedge until there is more clarity on the economic outlook. Despite the temporary uncertainty, the basis yields and call skew remain elevated for all listed maturities," Strijers remarked.