Observers expect Tuesday’s U.S. CPI report to show that disinflation is continuing to plague the world’s largest economy.
The correlation between the crypto market and the tech-heavy Nasdaq equity index has turned positive, indicating that digital asset investors are beginning to focus on risk appetite on Wall Street once again.
The 90-day correlation coefficient between the crypto market’s total capitalization and Nasdaq has risen from -0.12 to 0.74 in four weeks, reaching the highest point since early November, according to data from Bloomberg.
In other words, the crypto market is once again moving in tandem with technology stocks. On days when technology stocks trade higher, cryptocurrencies, including bitcoin (BTC) and ether (ETH), are likely to do the same. Conversely, a decline in technology stocks could drag the crypto market lower.
Speculation that Federal Reserve (Fed) would resort to rate cuts later this year is perhaps behind the renewed correlation between the liquidity-addicted risk assets.
The long-held positive relationship had weakened in the first quarter of this year as the Fed continued its tightening cycle.
The correlation between cryptocurrencies and other assets has been on the rise recently, with stocks and cryptocurrencies moving in tandem. This increased sensitivity suggests that movements in the stock market are causing fluctuations in the cryptocurrency market, and not the other way around.
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