- Bitcoin faces downward selling pressure, dipping below $27,000, as hawkish comments from the Federal Reserve and China’s manufacturing data raise concerns among crypto investors.
- Bitcoin’s correlation with the Nasdaq 100 has weakened. Last month in May, the BTC price tanked by 8% while Nasdaq 100 gained 8% driven by a rally in AI tech stocks.
The world’s largest cryptocurrency Bitcoin (BTC) continues to face downward selling pressure as the BTC price now dips under $27,000. As of press time, Bitcoin is trading at a price of $26,873 with a market cap of $521 billion.
On Wednesday, May 31, Cleveland’s Federal Reserve Bank president made hawkish comments thus raising the possibility of one more interest rate hike by the US central bank. Also, China’s disrupting manufacturing data and signs of a slowdown kept crypto investors at the edge.
With the US government making a move towards increasing the debt ceiling, analysts believe that there’s a lack of any compelling reason for the Fed to pause further monetary tightening. Thus, many also expect a 25 basis points rate hike by the Fed during the next FOMC meeting in June.
During her interview with the Financial Times yesterday, Fed Cleveland Bank President Loretta Mester said that there’s no reason for the Fed to discontinue further rate hikes. However, she said that he opinion would change in case the inflation cools down and the job market turns sour. Speaking to the Financial Times, Fed President Mester said:
We may have to go further. At this point, I don’t really necessarily see a compelling reason that we wouldn’t want to take another small step to counter some of that really embedded, stubborn inflationary pressure.
Bitcoin Decoupling From Nasdaq 100 Hurts Investors This Time
Bitcoin has given a strong rally this year in 2023 while beating every other asset class in the market. However, BTC registered the first negative monthly closing during the last month of May 2023.
Bitcoin ended the month of May with an 8% drop thereby fizzling out its year-to-date gains to 64% now, from the earlier 75%. As of now, the 30-day correlation between Bitcoin and Nasdaq 100 stands at 0.2 against the 0.8 last year in May 2022. A reading of 1 shows that both are moving in lockstep while a reading of -1 shows that they are moving in opposite directions.
Back during the pandemic era, both Bitcoin and Nasdaq 100 showed a strong correlation with each other. However, the correlation started weakening first during the crypto winter of 2022 amid a crash in the Bitcoin price and other virtual assets.
But starting this year 2023, Bitcoin and crypto registered a strong rally outperforming all other asset classes by a huge margin. While Bitcoin is up 64% year-to-date, the Nasdaq 100 has gained by 30% in the same period.
Last month, however, the Nasdaq 100 saw a strong rally due to the major euphoria in the AI tech stocks. TD Ameritrade senior trading strategist, Alex Coffey, told Bloomberg that digital assets could potentially benefit from decoupling from the Nasdaq and large mega-cap tech shares in the long term.
