(Bloomberg) — The correlation between Bitcoin and a gauge of U.S. technology stocks has hit a two-year high, indicating that the stock market’s reaction to U.S. inflation data due later Wednesday could set the tone for digital tokens.
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A 30-day correlation coefficient for the largest cryptocurrency and the Nasdaq 100 Index is around 0.70, according to data compiled by Bloomberg. A value of 1 indicates that the assets are moving in the same direction, while minus 1 indicates reverse equality.
The inflation report is expected to show strong price pressures just as markets worry about the Federal Reserve’s potential for further rate cuts in a context of a robust US economy and uncertainty about the impact of Donald Trump’s agenda.
Against that backdrop, bond yields and the dollar have risen, while stocks and crypto have been under pressure. Bitcoin changed 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 be sworn in on January 20 and could unleash a policy blitz. Speculators are weighing the risk of inflation tariffs and immigration policies against his promise to make the US the global home of crypto.
“The overall sensitivity to interest rates over the past month suggests increased importance of Wednesday’s CPI print,” K33 Research analysts Vetle Lunde and David Zimmerman wrote in a note. “Additionally, notable momentum could still be building for Trump in the days leading up to the inauguration.”
According to trading platform Derive.xyz, hedging activity in the options market is increasing, indicating that investors are positioning themselves for greater volatility.
The share of bearish bets has risen, indicating “hedging against potential downside risks as we approach the inauguration,” said Sean Dawson, head of research at Derive.xyz.
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