• If the U.S. inflation numbers are higher than the April numbers, we can expect further bloodbath in the crypto space.
• Bitcoin and the wider crypto space have been closely following the U.S. equity market which will continue to remain volatile for the foreseeable future.

The world’s largest cryptocurrency Bitcoin (BTC) had a pretty rough start to the week and things just seem to be exacerbating for now. Earlier today, the Bitcoin price took a dive under $30,000 for the first time since July 2021. However, it has recovered since and is currently trading at $31,500 levels.

Related: Bitcoin dips to the lowest level in 10 months – here’s why and what’s next

The overall market sentiment continues to remain negative with Bitcoin as of now. Thus, all eyes will be on Wednesday as the U.S. will release the inflation numbers for the month of April. During March, the CPI numbers touched 8.5 percent marking four-decade high inflation in the United States.

Since Bitcoin and the broader crypto market have been depending largely on the U.S. equity market, the inflation data will have a ripple effect on them. Thus, if the inflation data is higher than expected, we can expect the Federal Reserve to go hawkish on the quantitative tightening of the monetary policy. Meaning the Fed could announce more interest rate hikes which could lead to further correction in the U.S. equity market.

This can create even further pressure on the cryptocurrency market going ahead. Yuya Hasegawa, the crypto market analyst at Japanese bitcoin exchange Bitbank, says that the CPI data for Wednesday could be a “turning point” for Bitcoin. Speaking to CNBC, Hasegawa said:

If the CPI shows no sign of slowing down, it will add to the fear of faster monetary tightening. But other inflation metrics are starting to slow down and the April CPI could follow suit, which in turn will likely alleviate the market’s concern and help recover its risk sentiment.

Bitcoin and the U.S. equity market

Bitcoin has been largely following the U.S. equity market this year in 2022 and even over the last few years. Especially, its correlation with the tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) is quite higher.

But we have been seeing a major sell-off in growth stocks whose valuations have been skyrocketing during the 2021 bull run. On the other hand, even blue-chip tech companies like Amazon and Google are giving underwhelming results as per market expectations. Thus, there’s some sell-off in this space as well!

Speaking of the development, Steven McClurg, chief investment officer at Valkyrie Investments said:

Equity and Crypto markets are selling off across the board due to a broad shift from risk-off to heavy risk-selling. The correlation between the two asset classes has grown more pronounced in recent months due to the number of publicly traded companies involved in blockchain and digital assets, and we are likely to see these markets move largely in lockstep for at least some time.

Thus, along with the U.S. equity market, we can expect volatility to continue for the crypto market as well.

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