(Bloomberg) — The correlation between bitcoin and a measure of U.S. technology stocks has reached a two-year high, suggesting that the stock market’s reaction to U.S. inflation data due later Wednesday may set the tone for digital tokens.
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Data compiled by Bloomberg shows that the 30-day correlation coefficient for the largest cryptocurrency and the Nasdaq 100 is around 0.70. A reading of 1 indicates that the assets are moving in a consolidated manner, while a reading of 1 indicates an inverse breakeven.
The inflation report is expected to show steady pressure on prices as markets worry about the Federal Reserve’s scope for further interest rate cuts amid a strong US economy and uncertainty over the impact of Donald Trump’s agenda.
Against this backdrop, bond yields and the dollar rose, while stocks and cryptocurrencies came under pressure. Bitcoin was trading at $97,000 as of 6 a.m. Wednesday in London, about $11,300 below the record high set last month.
Trump’s inauguration
President-elect Trump is scheduled to be sworn in on January 20, and may launch a political blitz. Speculators are weighing the risks of inflationary tariffs and immigration policies against his pledge to make the United States the global home of cryptocurrencies.
“The overall sensitivity to interest rates over the past month suggests an increased importance of Wednesday’s CPI reading,” K33 Research analysts Vetel Lund and David Zimmerman wrote in a note. “In addition, Trump’s notable momentum may continue to build in the days leading up to the inauguration.”
Hedging activity is increasing in the options market, suggesting that investors are bracing for increased volatility, according to trading platform Derive.xyz.
Sean Dawson, head of research at Derive.xyz, said the proportion of bearish bets rose, suggesting a “hedge against potential downside risk as we approach the open”.
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