Bitcoin continues to correlate with the Nasdaq 100 so far in 2023

by James · February 15, 2023

Last year, bitcoin moved in tandem with the stock market as well as the bond market as inflation put downward pressure on most assets. In the recent rally, bitcoin is doing the same, trailing indices such as the Nasdaq 100 as it moves higher amid expectations of fewer rate hikes.

However, that remains to be seen, as the US Federal Reserve may reverse course if it feels it does not have inflation fully under control. If that’s the case, more volatility could be in store for the stock market, which could translate into volatility in the cryptocurrency market.

“On days when tech stocks trade higher, cryptocurrencies, including bitcoin (BTC) and ether (ETH), are likely to do the same,” a Coindesk article noted. “Conversely, a decline in tech stocks could drag the crypto market down.”

That said, macroeconomic catalysts like inflation reports and interest rate decisions are likely to move cryptocurrencies again this year. A look at the Nasdaq 100 can give market watchers an idea of what the cryptocurrency market can do.

“The renewed positive correlation implies increased sensitivity of cryptocurrencies to macroeconomic data such as the US Consumer Price Index (CPI), which injects volatility into equity markets,” the article further added. “The CPI days were among the most volatile for US stocks last year, following MarketWatch.”

Get Bitcoin exposure on a regulated exchange

Gaining bitcoin exposure does not mean investors have to trade digital currencies by opening a separate account on an unregulated cryptocurrency exchange that could potentially open them up to potential risk. That said, investors have options in regulated markets to gain cryptocurrency exposure against major coins like bitcoin.

Exchange-traded funds (ETFs) can allow investors to participate in the bitcoin price action without directly investing in the digital currency itself. Consider ProShares Bitcoin Strategy ETF (BITO) and ProShares Short Bitcoin Strategy ETF (BITI).

For the bulls, BITO builds capital growth through the use of bitcoin futures contracts, allowing investors to gain exposure to bitcoin price appreciation within the regulatory framework of a traditional financial exchange. For the bears, BITI seeks daily investment results equal to the inverse (-1x) of the daily performance of the S&P CME Bitcoin Futures Index, allowing traders to profit from bitcoin price declines.

For more news, information and analysis, visit Crypto channel.