Bitcoin-Nasdaq correlation hits 2-year high as mixed US inflation data clouds Fed’s path

Bitcoin-Nasdaq correlation reached its highest level in two years, as the release of US inflation data bolstered digital asset performance.

Bitcoin and US tech stocks now have a 30-day correlation coefficient of 0.70.

The crypto and stock markets surged following the release of the inflation report

The Bureau of Labor Statistics released the inflation report on Wednesday. Since then, the stock and crypto prices have made several gains. Following the inflation report, S&P 500 and Nasdaq futures gained over 1%, while Bitcoin surged by more than 2.6%. 

The report showed that the consumer price index increased by 0.4% month-over-month, bringing the annual inflation rate to 2.9%—in line with economists’ expectations. According to Dow Jones, most economists had anticipated the inflation rate would fall within a range of 0.3% to 2.9%

Moreover, the core CPI annual rate stood at 3.2%, slightly better than the 3.3% projection. Additionally, Headline CPI inflation was on the rise for the last 3 straight months; however, core inflation was dwindling, which Kobeissi Letter did describe as a “A mixed situation for the Fed.”

Nevertheless, crypto and tech stock markets are still waiting for the Fed’s announcement on potentially more interest cuts at the upcoming FOMC meeting. Given the country’s high inflation, the Feds had earlier hinted that the current interest rates may stay a little longer.

Currently, Bitcoin and US tech stocks are closely correlated at a coefficient of 0.70.

Analysts believe Trump’s inauguration may have an impact on crypto prices

As President-elect Trump waits to be sworn in on January 20, some analysts believe his inauguration could rally another crypto bullish momentum. 

K33 Research analysts Vetle Lunde and David Zimmerman remarked:

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.

– K33 Research analysts

However, hedging activity is rising, suggesting that crypto investors anticipate increased volatility in the coming days. Sean Dawson, Head of Research at Derive.xyz, has even commented on the growing share of bearish bets, saying investors are preparing for possible price falls ahead of the inauguration.