(Bloomberg) — Bitcoin and US tech stocks are showing a significant connection, hitting a correlation level that hasn’t been seen in two years. This could mean that how the stock market reacts to today’s anticipated US inflation data could heavily influence digital tokens.
According to Bloomberg’s data, the 30-day correlation coefficient between Bitcoin and the Nasdaq 100 Index is around 0.70. In simple terms, a coefficient of 1 would mean that the assets move perfectly together, whereas a minus 1 would indicate they move in exactly opposite directions.
The upcoming inflation report is expected to affirm persistent price pressures, amid a robust US economy. This situation leads to some uncertainty about how much room the Federal Reserve has to cut interest rates. At the same time, questions linger around the implications of Donald Trump’s policies.
Amidst this backdrop, bond yields and the dollar have been climbing, while both stocks and cryptocurrencies are feeling the heat. As of 6 a.m. in London on Wednesday, Bitcoin traded at $97,000, trailing by approximately $11,300 from its all-time high reached last month.
Looking ahead to the Trump administration, with the presidential inauguration set for January 20, anticipation is building around potential policy moves. Investors are juggling the potential threats of inflation-driven tariff and immigration policies against Trump’s commitment to making the US a leader in cryptocurrency.
Analysts Vetle Lunde and David Zimmerman from K33 Research note that, “Given how sensitive the markets have been to interest rates recently, Wednesday’s consumer price index could be particularly impactful.” They also hinted at the possibility of Trump-related market momentum leading up to the inauguration.
In the options market, hedging activity is on the rise, reflecting that investors are bracing for increased market volatility, says trading platform Derive.xyz. Sean Dawson, head of research at the platform, pointed out that there’s been a climb in bearish bets, suggesting investors are positioning themselves against potential downsides as the inauguration date approaches.
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