Bitcoin’s relationship with technology stocks has reached its strongest level in two years, highlighting how Wednesday’s U.S. inflation report could ripple through both traditional and digital asset markets. The cryptocurrency’s movements are increasingly synchronized with the Nasdaq 100 Index, showing a correlation coefficient of 0.70 – the highest since 2022. This close relationship suggests that crypto traders are taking their cues from broader market sentiment, particularly in tech stocks.
Trading near $97,000 in London early Wednesday, Bitcoin sits roughly $11,300 below its recent record high. The pullback reflects broader market concerns about potential limitations on Federal Reserve rate cuts, especially given recent signs of economic strength and uncertainty surrounding Donald Trump’s upcoming presidency.
Market dynamics have shifted notably, with rising bond yields and a strengthening dollar creating headwinds for both stocks and cryptocurrencies. The upcoming inflation report’s significance has been amplified by these conditions, as it could significantly influence Fed policy expectations.
Trump’s inauguration on January 20 adds another layer of complexity to market calculations. Traders are weighing two competing narratives: potential inflationary pressures from proposed tariff and immigration policies against Trump’s stated commitment to making the U.S. a crypto-friendly jurisdiction.
In the options market, traders appear to be preparing for increased volatility. “We’re seeing a notable uptick in hedging activity, with more bearish positions being taken as we approach the inauguration,” notes Sean Dawson, Head of Research at Derive.xyz.
K33 Research analysts Vetle Lunde and David Zimmerman emphasize the critical nature of Wednesday’s CPI data, suggesting that market sensitivity to interest rates has heightened in recent weeks. They also point to potential market movements around Trump’s inauguration as a key factor to watch.
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