Bitcoin holders brace for impact as BTC correlation with stocks increases ahead of US CPI release


  • Bitcoin holders are watching Tuesday’s US CPI data release with renewed focus as the correlation between crypto and tech stocks climbs to 0.74. 
  • The core CPI is forecast to drop to 5.5% from 5.7%, however a better-than-expected figure could dash hopes of a Fed pivot. 
  • Higher-than-expected inflation would weigh on risk assets including cryptocurrencies.

Experts predict the US Federal Reserve will continue slowing rate hikes with the soon-to-be -released core CPI, which is forecast to come out at 5.5% in January, after printing 5.7% in December 2022.

This should be positive for risk assets such as equities and also cryptos which enjoy a high correlation with stocks. 

The correlation between Bitcoin and the tech-heavy Nasdaq index, for example, has climbed from -0.12 to 0.74 within the past four weeks. 

This suggests the US Consumer Price Index (CPI) data release, scheduled for today, February 14, at 13:30 GMT could have a big impact on both assets classes. 

Also read: US CPI Preview: Goldman Sachs, WSJ’s Timiraos tease upside surprise from January inflation

US CPI expectations for January 2023

The key CPI data, which is released by the US Bureau of Labor Statistics, is expected to show annual headline CPI plummet to 6.2%, from 6.5% in December. Core CPI figures, that exclude volatile food and energy prices are expected to print 5.5% YoY, down a 0.2% from the previous month. 

US CPI release expectations as seen on the FXStreet economic calendars

US CPI release expectations as seen on the FXStreet economic calendar

While experts do not expect surprises in monthly CPI releases, the massive difference between expected and actual US Nonfarm Payroll numbers proved bearish for Bitcoin and cryptocurrency prices, last Friday, February 10, and there is a risk the same could happen again. 

Should CPI come in higher than expected, risk assets could witness a bloodbath, wiping out gains from the past thirty days. 

How Bitcoin and cryptocurrency prices will react to US CPI release 

Bitcoin and cryptocurrency prices have suffered a decline over the past week as a result of the US regulatory crackdown on crypto exchanges and stablecoins, in which they are now considering the latter “unregulated securities.”

With the upcoming US CPI release there is now a risk of further volatility. Since markets have already priced in expectations, a better-than-expected figure could dash hopes of the US Federal Reserve’s pivot in favor of easing. Technology stocks and cryptocurrencies could tumble on the news. 

Experts at QCP Capital believe, February 14’s CPI price is important to determine the extent of downside in Bitcoin and cryptocurrency prices. 

Yohay Elam, Senior Analyst at FXStreet was quoted as saying:

I would like to emphasize that the US Consumer Price Index report is the No. 1 market mover, triggering massive volatility.

QCP Capital’s analysts argue that risk assets have not adjusted to rising rate expectations and Tuesday’s CPI print will bring all markets in line. A higher-than-expected figure would trigger a sell-off in US equities and Bitcoin; a lower number a rally. 

Analysts emphasized that a high number for January’s CPI data is baked into consensus. 

Will Bitcoin’s rising correlation with tech-heavy Nasdaq result in jeopardy

Bitcoin holders now share Wall Street’s risk appetite as Bitcoin’s correlation with Nasdaq has climbed to 0.75, its highest level since November 2022. 

The crypto market is back in line with technology stocks. Events that trigger a rally in tech stocks could prove bullish for Bitcoin and cryptocurrencies and negative catalysts, like a higher-than-expected CPI print could drag both tech stocks and cryptocurrency prices lower. 


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Join Telegram

Recommended content


Recommended Content

Editors’ Picks

Ripple extends gains by 5% on Friday as CEO hints at institutional crypto products with CME XRP-Dollar index

Ripple extends gains by 5% on Friday as CEO hints at institutional crypto products with CME XRP-Dollar index

Ripple (XRP) traders’ sentiment turned positive on Friday, as CEO Brad Garlinghouse highlighted the addition of XRP-Dollar reference rate and indices to the CME Group and CF Benchmarks. 

More Ripple News

Worldcoin crumbles under selling pressure even as OpenAI eyes human-level problem-solving

Worldcoin crumbles under selling pressure even as OpenAI eyes human-level problem-solving

OpenAI, the American tech firm behind the Large Language Model ChatGPT, announced five levels towards building an Artificial General Intelligence (AGI). Employees at the firm told Bloomberg that with ChatGPT, Open AI is currently at level one. 

More Worldcoin News

VeChain break above descending trendline sparks rally speculation

VeChain break above descending trendline sparks rally speculation

VeChain price breaks above the descending trendline, suggesting a bullish move. Sideline buyers can accumulate VET between $0.0247 and $0.0239. A daily candlestick close below $0.0204 would invalidate the bullish thesis.

More VeChain News

Bitcoin Weekly Forecast: Investors wonder if BTC troubles are behind

Bitcoin Weekly Forecast: Investors wonder if BTC troubles are behind

Bitcoin (BTC) stabilized around the $57,000 mark this week, while the German Government persists in transferring Bitcoin to exchanges. Concurrently, US spot Bitcoin ETFs have recorded inflows. 

More Bitcoin News

Bitcoin: Investors wonder if BTC troubles are behind

Bitcoin: Investors wonder if BTC troubles are behind

Bitcoin (BTC) stabilized around the $57,000 mark this week, while the German Government persists in transferring Bitcoin to exchanges. Concurrently, US spot Bitcoin ETFs have recorded inflows. On-chain analytics indicate that whales are accumulating BTC during dips, potentially foreshadowing an imminent rally in the days ahead.

 

Read full analysis

BTC

ETH

XRP