After Inflation Data Released…Bitcoin Price Falls 10% and Increases Correlations with the S&P 500
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Answer After Inflation Data Released…Bitcoin Price Falls 10% and Increases Correlations with the S&P 500
After the release of higher-than-expected CPI inflation data on Tuesday, Bitcoin and the cryptocurrency market saw a sharp decline.
Currently, Bitcoin price is trading at the $20,000 level, i.e. it has recorded a dip and a drop of around 10% over the past 24 hours which is just over the critical support of $20,000.
The bitcoin price crash came along with a 4.5% S&P 500 drop which fell below $4,000.
Which is also indicated by the Santiment platform through the chart below:
After the release of disappointing news on the CPI inflation data on Tuesday, Bitcoin plummeted along with the biggest daily drop for the SP500 in two years.
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The correlation between sectors remains high as the above chart shows.
Bitcoin showed greater correlation with the S&P 500.
As long as Bitcoin continues to follow the stock markets, it will likely remain in the grip of a traditional economy in the future.
Bitcoin corrected 10% in the last 24 hours:
If bitcoin continues to pursue its relationship with the S&P 500, another drop of 20% to $16,000 is very likely.
Jeremy Timmer, Global Macro Director at Fidelity stated:
If the forward multiplier of 14 is the correct valuation, simple math will tell that the fair value of the S&P 500 is 3200-3400 at $230 a share, this indicates that this bear market is not over yet.
When news of US CPI inflation was released on Tuesday, the Fear and Greed Index fell from 34/100 to 27/100.
The index has not yet entered the “extreme fear” area, which shows a kind of investor resilience at this stage.
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Once again, inflation news is preventing Bitcoin from surpassing its 200-day moving average (DMA), which is a critical resistance area for Bitcoin this year.
Besides Bitcoin, many other altcoins have entered correction mode as well.
A day before the consolidation event, the price of Ethereum (ETH) fell again by 7% to move towards the $1600 levels.
With the merger upgrade approaching, the ETH price has come under some selling pressure.
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