Market Momentum Shifts as Inflation Fears Ease
The cryptocurrency market is experiencing a resurgence, with Bitcoin leading the charge. On Wednesday, the flagship cryptocurrency hovered just below $100,000, marking a 2% increase and a 7% gain over the past two days, according to Coin Metrics. The broader market, as measured by the CoinDesk 20 index, also saw a 5% increase.
Inflation Report Sparks Optimism
The catalyst for this upward trend is the latest consumer price index report, which revealed an unexpected slowdown in core inflation for December. This follows a similar positive reading in the producer price index, which showed wholesale prices rising less than expected. These reports have eased investor concerns about inflation, leading to a renewed appetite for riskier assets.
Crypto Correlations Shift
In recent weeks, Bitcoin’s price has been closely tied to the equities market, thanks to the growing popularity of Bitcoin ETFs. As a result, Bitcoin’s correlation with the S&P 500 has increased, while its correlation with gold has decreased sharply since the end of December. This shift in correlations suggests that investors are increasingly viewing Bitcoin as a risk-on asset, rather than a safe-haven asset like gold.
Bitcoin Proxies See Gains
Shares of Coinbase, a leading cryptocurrency exchange, saw a 6% increase, while Bitcoin proxies MicroStrategy and Mara Holdings each gained around 5%. This suggests that investors are not only bullish on Bitcoin but also on the broader cryptocurrency ecosystem.
Rebound from Recent Lows
This recent surge comes on the heels of a tumultuous period for Bitcoin, which saw its price dip below $90,000 on Monday. The cryptocurrency had been struggling since Federal Reserve Chair Jerome Powell’s inflation warning on December 18, and further losses were incurred last week as bond yields spiked. However, with inflation fears easing, Bitcoin is once again on the rise.
What’s Next for Bitcoin?
As the cryptocurrency market continues to evolve, investors will be watching closely to see if this upward trend can be sustained. With Bitcoin’s correlation to the equities market on the rise, it’s likely that the cryptocurrency’s price will continue to be influenced by broader market trends. One thing is certain, however – Bitcoin’s recent rebound is a welcome respite for investors who have been waiting for a turnaround.
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