As a researcher with a background in financial markets and cryptocurrencies, I have closely monitored the relationship between Bitcoin and technology stocks over the past few months. The recent report by Bloomberg indicating a high correlation between the two has piqued my interest.
As a researcher studying the financial markets, I’ve noticed an intriguing pattern emerging between Bitcoin and technology stocks. According to recent reports from Bloomberg published on Fridays, these two asset classes are now moving in tandem once more.
The connection between the leading cryptocurrency and the Nasdaq 100 tech index, represented by the flagship cryptocurrency and the index itself, has attained a correlation coefficient of 0.46 over the past 90 days. This is the strongest correlation observed in nearly a year.
As a crypto investor, I’ve noticed an unsettling trend: the growing correlation between Bitcoin and other cryptocurrencies. This correlation weakens the argument for diversification often advocated by Bitcoin supporters. In simpler terms, when Bitcoin performs well, it seems that most other cryptocurrencies follow suit – and vice versa. This correlation can leave our portfolios more exposed to market risks than we might have initially anticipated.
This year, the relationship between Bitcoin and stocks underwent a notable shift. As early as April, as per Fidelity’s Jurrien Timmer’s assessment, their correlation became negative.
The relationship between Bitcoin and the stock market can change significantly depending on broader financial circumstances. For example, it reached a peak correlation coefficient of 0.50 in May 2022. Similarly, its connection grew extremely strong during the quantitative easing period in 2020.
This week, US stock markets reached new peaks as the latest Consumer Price Index (CPI) data indicated a decrease in American inflation rates.
Bitcoin has bounced back, regaining the sought-after $67,000 mark and hitting a new peak price since late April.
As a researcher studying financial markets, I’ve recently come across some intriguing inflation data. This new information has sparked renewed optimism among Wall Street investors, who now anticipate that the U.S. Federal Reserve may reconsider their earlier stance on interest rates and potentially reduce them multiple times in 2023. Such a move would bring significant relief to risk assets like stocks and cryptocurrencies by lowering borrowing costs, making these investments more attractive.
As a researcher, I’ve observed that although the Federal Reserve has taken steps to curb inflation, it hasn’t fully succeeded in doing so yet. This raises a question about the validity of the current investor optimism.
This afternoon, Michelle Bowman, a member of the Federal Reserve’s governing body in the United States, anticipates that inflation will persist at heightened levels for an extended period. Nevertheless, she has expressed her readiness to raise interest rates if necessary.
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2024-05-17 21:58