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“Higher-than-expected inflation could trigger equity market volatility, potentially dragging Bitcoin lower,” Bitfinex’ head of derivatives told Cointelegraph.
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Bitcoin’s correlation with top technology stocks has climbed to a two-year high, reflecting its growing sensitivity to broader economic factors, including the upcoming Consumer Price Index (CPI) report in the US.
Bitcoin (BTC) briefly recovered above the $100,000 mark on Jan. 15 for the first time since Jan. 7, Cointelegraph Markets Pro data shows.
BTC/USD, 1-month chart. Source: Cointelegraph
However, Bitcoin’s growing correlation with the Nasdaq 100 signals more sensitivity to economic data, according to Jag Kooner, head of derivatives at Bitfinex.
Bitcoin’s correlation with the Nasdaq reached a two-year high, “making it sensitive to today’s CPI data” and other economic factors, he told Cointelegraph.
“Higher-than-expected inflation could trigger equity market volatility, potentially dragging Bitcoin lower. Conversely, a positive market reaction may support Bitcoin’s upward move,” he said.
Bitcoin correlation with Nasdaq 100. Source: Bloomberg
The prediction comes a day after Bitcoin’s correlation with the Nasdaq index surpassed 0.70, a level not seen since 2023, Bloomberg data shows.
Related: Bitcoin exchange reserves near 7-year low as hedge funds buy the dip
Bitcoin correction mainly caused by Fed interest rate concerns
Bitcoin’s price is growing increasingly correlated with developments in the traditional financial system.
Ryan Lee, chief analyst at Bitget Research, said Bitcoin’s recent dip below $92,500 stemmed largely from concerns about the Federal Reserve’s tightening monetary policy for 2025:
“Bitcoin’s dip stems primarily from strong US economic data pointing toward potential interest rate hikes. This development makes cryptocurrencies less attractive as investments, while the Federal Reserve’s signals of tighter monetary policy further intensify market corrections.”
Related: KULR Technology predicts $200K Bitcoin price after buying $97K dip
Moreover, crypto prices may react to tightening monetary policy faster than traditional assets.
“We expect Bitcoin and crypto price movements to act as a faster beta to the evolving macro backdrop and price in the number of rate cuts we could see in 2025 much faster than other risk assets,” Kooner added.
Target interest rate probabilities. June 18. Source: CME Group
Markets are now expecting the first US interest rate cut to occur on June 18, according to the latest estimates of the CME Group’s FedWatch tool.
How Much Higher Will Bitcoin Go? | Mark Yusko’s 2025 Predictions. Source: YouTube
Magazine: Crypto to ‘Banana Singularity,’ Bybit halts India services, and more: Hodler’s Digest, Jan. 5 – 11
This article first appeared at Cointelegraph.com News
