Recent data has shown a stark disconnect between Bitcoin and US stocks, marking a significant shift from their previously positive correlation. According to market intelligence platform IntoTheBlock, Bitcoin’s correlation with the Nasdaq 100 and S&P 500 has plummeted to -0.78 and -0.83, respectively. This negative correlation implies that Bitcoin and these assets now tend to move in opposite directions, a stark departure from their previous relationship.
The recent divergence between Bitcoin and US stocks can be attributed to various factors, one of which is the substantial selling pressure that Bitcoin has been facing. This selling pressure, as pointed out by Joshua Lim, co-founder of trading firm Arbelos Markets, has limited Bitcoin’s upside potential while US stocks continue to hit record highs. The German government’s decision to offload seized bitcoins has also contributed to the selling pressure on Bitcoin, further straining its correlation with US equities.
The selling pressure on Bitcoin has been relentless, with Bitcoin miners offloading a significant amount of their holdings in June. Additionally, the German government’s continued selling spree of bitcoins seized from Movie2k has added to the downward pressure on Bitcoin. This persistent selling pressure has caused Bitcoin’s correlation with US stocks to drop sharply, further widening the gap between the two assets.
Upcoming Test: US CPI Inflation Data
The true test for Bitcoin and US stocks will come with the release of the US Consumer Price Index (CPI) inflation data on July 11. Positive inflation data is expected to have a bullish impact on these assets, particularly Bitcoin and the broader crypto market. In the short term, favorable inflation data could potentially spark a rebound in Bitcoin’s price, as it aims to establish $60,000 as a strong support level once again.
The recent detachment of Bitcoin from US stocks signifies a critical shift in their relationship. The selling pressure on Bitcoin, coupled with external factors such as the German government’s actions, has significantly impacted Bitcoin’s correlation with US equities. The upcoming CPI inflation data release will serve as a litmus test for the resilience of Bitcoin and US stocks in the face of economic indicators.
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