After softer-than-expected US inflation helped to revive demand for risky assets like stocks and cryptocurrencies, Bitcoin surged beyond $100,000 once more.
Over the last four weeks, the original digital asset has been trading between $90,000 and $100,000. On Wednesday, the token increased by up to 3.9% to $100,222. It recently hit $100,000 on January 7, which is about $8,000 less than its peak on December 17.
As the equity market’s response to US inflation data on Wednesday contributed to a greater mood for digital tokens, the correlation between Bitcoin and a measure of US technology stocks has reached a two-year high.
According to data gathered by Bloomberg, the 30-day correlation coefficient between the largest cryptocurrency and the Nasdaq 100 Index is approximately 0.70. Assets moving in lockstep are indicated by a reading of 1, and an inverse tie is indicated by a reading of minus 1.
According to the inflation report, prices increased 2.9% year over year, which was in line with predictions. Core inflation decreased by 0.2% month over month, which was less than what analysts had predicted. Amid a strong US economy and uncertainty around the effects of Donald Trump’s program, markets have been worrying about the Federal Reserve’s potential for additional interest-rate reduction.
Stocks and cryptocurrency were boosted by the weaker core price index. Following the inflation news, the S&P 500 and Nasdaq 100 indices have increased by more than 1%.
The Inauguration of Trump
On January 20, President-elect Trump will take office and might launch a flurry of new policies. Speculators are balancing his promise to establish the US as the worldwide hub for cryptocurrency with the potential of inflationary tariffs and immigration policies.
In a letter, K33 Research analysts Vetle Lunde and David Zimmerman stated, “The overall sensitivity to interest rates over the past month suggests increased importance of Wednesday’s CPI print.” Furthermore, significant Trump momentum could still develop in the days preceding the inauguration.
Trading site Derive.xyz reports that hedging activity in the options market is increasing, indicating that investors are preparing for higher volatility.
According to Sean Dawson, Head of Research at Derive.xyz, the percentage of pessimistic wagers has increased, suggesting that investors are “hedging against potential downside risks as we approach the inauguration.”
