Recent Bloomberg reports indicate that Bitcoin, the leading cryptocurrency, is once again trading in tandem with technology stocks.
The 90-day correlation between Bitcoin and the Nasdaq 100, which includes the largest technology companies, reached 0.46, its highest level in almost a year.
This increasing correlation reflects the decline in the idea of portfolio diversification that Bitcoin proponents often emphasize.
Bitcoin correlation with stocks:
The beginning of this year saw a noticeable decline in Bitcoin’s correlation with stocks and in April, the correlation became negative according to Jurian Timmer of Fidelity.
The relationship between Bitcoin and major stocks fluctuates based on macroeconomic conditions.
For example, this correlation rose to 0.50 in May 2022, as well as to high levels in 2020 during the period of quantitative easing.
Earlier this week, major US stock market averages hit record highs after the latest CPI report showed US inflation falling.
Simultaneously, Bitcoin prices rose again, reaching the level of $67,000, the highest price since early April.
Recent inflation data has led to renewed optimism, with Wall Street believing the US Federal Reserve may cut interest rates several times this year.
Lower borrowing costs are considered a huge positive for risk assets such as stocks and cryptocurrencies.
But the Federal Reserve has not yet succeeded in controlling inflation completely, suggesting that investor optimism may be premature.
Posted Using InLeo Alpha