The correlation between Bitcoin and US tech stocks has risen to 0.70, reflecting the strengthened position of digital assets following the release of US inflation data.
Crypto and Stock Markets Surge After Inflation Report
The Bureau of Labor Statistics released the inflation report on Wednesday, which led to gains in the stock and crypto markets. S&P 500 and Nasdaq futures increased by more than 1%, while Bitcoin surged by over 2.6%. The report indicated that the consumer price index rose by 0.4% month-over-month, aligning with economists' expectations within the range of 0.3% to 2.9%. The core CPI annual rate stood at 3.2%, slightly better than the projected 3.3%. While Headline CPI inflation has been rising for three consecutive months, core inflation has been dwindling, described as a "mixed situation for the Fed."
Impact of Additional Factors on Crypto Market
Despite recent gains, crypto and tech stock markets are still awaiting the Fed's announcement regarding potential interest rate cuts at the upcoming FOMC meeting. With the country's high inflation, the Fed had earlier suggested that current interest rates might persist longer.
Analysts' Views on the Future of Cryptocurrencies
Some analysts believe that Trump's inauguration could affect another bullish momentum for crypto prices. K33 Research analysts Vetle Lunde and David Zimmerman noted: "The overall sensitivity to interest rates over the past month suggests increased importance of Wednesday’s CPI print. Additionally, notable Trump momentum may still form in the days leading into the inauguration." Meanwhile, hedging activity is rising, indicating that crypto investors are preparing for increased volatility in the coming days.
The soaring correlation between Bitcoin and Nasdaq highlights Bitcoin's growing integration into financial markets amid rising inflation data. The upcoming Fed meeting and Trump’s inauguration may add more dynamics to the market.
