Bitcoin attempts to reclaim the $65,000 level following algorithmic selling pressure and a rebound in US equities, highlighting the growing correlation between cryptocurrencies and tech stocks.
Key Takeaways
- Bitcoin rebounded to $65,000 as US stocks recovered from recent losses.
- Economic data like the PCE Index and jobless claims influenced Bitcoin's price movements.
Bitcoin prices moved back towards $65,000 as US stock markets recovered from their worst day since 2022, with traders closely watching key support levels and the growing correlation between crypto and tech stocks.
Bitcoin revisited the $65,000 mark after the July 25 Wall Street open as US equities bounced back from steep losses. Data from TradingView showed Bitcoin (BTC) rebounding, following initial selling pressure from algorithmic trading.
Popular trader Skew highlighted one entity in particular as an “aggro seller”, explaining that these actions “slammed prices lower before large passive buyers came in.” Skew suggests price momentum was driven by positions covering repeatedly until the market became net long.
The modest recovery in US stocks came after major losses the previous day. On July 24, the Nasdaq 100 fell 3.6% in its worst session since November 2022. The S&P 500 also saw a 2% slide. A similar pattern was observed on Bitcoin, which hit local lows of $63,424 on the same day.
Macroeconomic data pushing crypto volatility
US macroeconomic data releases added complexity to the market outlook. The Personal Consumption Expenditures (PCE) Index came in lower than expected, potentially supporting risk assets by improving odds of interest rate cuts. Both the initial and ongoing jobless claims were below expectations, indicating labor market resilience and reducing bets on near-term Federal Reserve rate cuts. For context, the next Fed meeting is scheduled for July 31.
Analysts stressed the importance of Bitcoin maintaining the $65,000 level, which represents the short-term holder realized price. Trader Rekt Capital noted Bitcoin was “in the process of retesting the $65,000 level in a volatile manner” and needed to close above it daily to keep price within the $65,000-$71,500 range.
The struggle to reclaim $65,000 comes amid a broader pullback in tech stocks and cryptocurrencies following strong US GDP data. The tech-heavy Nasdaq Composite fell over 1.2% in early trading July 25 after GDP growth beat forecasts at 2.8% for Q2 2024. Bitcoin traded around $63,800, failing to reverse its recent downtrend despite cooling PCE inflation figures.
Bitcoin and Nasdaq-100 correlation
The recent price movements highlight the growing correlation between Bitcoin and the Nasdaq-100 index, which has become increasingly apparent in recent years. Several factors contribute to this relationship.
Market sentiment plays a crucial role in driving simultaneous movements in both tech stocks and Bitcoin. Periods of risk-on or risk-off sentiment can affect both asset classes similarly, leading to correlated price action. This was evident in the recent sell-off and subsequent recovery across both markets.
Macroeconomic factors, such as interest rates, inflation, and economic indicators, influence both Bitcoin and tech stocks. Central bank policies and economic stimulus measures can impact market liquidity and investor behavior, affecting both sectors. The recent PCE data and its impact on rate cut expectations demonstrate this interconnectedness.
Technological developments can simultaneously affect tech stocks and Bitcoin. Innovations and advancements in technology often have implications for both sectors, while regulatory news and developments in the crypto space can impact both markets. The integration of blockchain technology within the tech sector further drives correlation.
Investment trends also contribute to the growing relationship between Bitcoin and tech stocks. Increasing institutional investment in Bitcoin has led to a higher correlation with traditional financial markets, particularly tech stocks. As more institutional investors add Bitcoin to their portfolios, its price movements may become more closely aligned with broader market trends.
The deepening correlation between Bitcoin and the Nasdaq-100 presents both opportunities and challenges for investors. While it may provide some predictability in market movements, it also potentially reduces the diversification benefits that Bitcoin once offered as a more independent asset class.
