Markets await US CPI test, taking bitcoin away from tech stocks.
(Bloomberg) — The correlation between bitcoin and a benchmark of U.S. tech stocks hit a two-year high, suggesting the equity market’s reaction to U.S. inflation data late Wednesday could set the tone for digital tokens.
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Data compiled by Bloomberg show that the 30-day correlation coefficient for the largest cryptocurrency and the Nasdaq 100 index is around 0.70. A reading of 1 indicates that the assets are moving in lockstep, while a minus 1 indicates inverse parity.
The inflation report is expected to show strong inflationary pressures. Uncertainty over the impact of the US economy and Donald Trump’s agenda as markets fretted over the scope of further interest rate cuts by the Federal Reserve.
Bond yields and the dollar rose against that backdrop, while stocks and crypto were under pressure. Bitcoin traded hands at $97,000 as of 6 a.m. Wednesday in London, about $11,300 below last month’s record high.
Trump’s inauguration
President-elect Trump will take the oath of office on January 20, and it could be a policy impasse. Observers are weighing the risks of inflation and immigration policy against his promise to make the US the global home of crypto.
“Overall sentiment toward interest rates over the past month highlights the importance of Wednesday’s CPI release,” K33 Research analysts Vettel Lunde and David Zimmerman wrote in a note. “Furthermore, the popular Trump initiative could be created in the days leading up to Inauguration Day.”
According to trading platform Derive.xyz, hedging activity is increasing in the options market, indicating that investors are ready for volatility.
Derive.xyz’s head of research, Sean Dawson, pointed to “preventing potential losses as we get closer to the graduation.”
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