Tech
Bitcoin Price Nears $65K as US Stocks Recover From Sharp Selloff
Key points
- Bitcoin bounced back to $65,000 as U.S. stocks recovered from recent losses.
- Economic data such as the PCE index and jobless claims have influenced the price action of Bitcoin.
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Bitcoin prices rallied again towards $65,000 as US stock markets recovered from their worst day since 2022, with traders closely monitoring key support levels and the growing correlation between cryptocurrencies and tech stocks.
Bitcoin revisited the $65,000 mark after Wall Street opened on July 25, as U.S. stocks recovered from steep losses. Data from TradingView showed a rebound in Bitcoin (BTC), following initial selling pressure from algorithmic trading.
The popular trader Skew highlighted one entity in particular as an “aggressive seller,” explaining that these actions “dropped prices before large passive buyers arrived.” Skew suggests that the price momentum was driven by repeated covering until the market became clearly long.
The modest recovery in U.S. 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% decline. A similar pattern was seen on Bitcoin, which hit local lows of $63,424 the same day.
Macroeconomic data drives cryptocurrency volatility
Macroeconomic data from the US added complexity to the market outlook. The Personal Consumption Expenditures (PCE) index came in lower than expected, potentially supporting risk assets and improving the likelihood of interest rate cuts. Both initial and ongoing jobless claims were lower than expected, indicating the resilience of the labor market and reducing bets on near-term Federal Reserve rate cuts. For context, the next Fed meeting is scheduled for July 31.
Analysts have emphasized the importance of Bitcoin holding the $65,000 level, which represents the price realized by the short-term holder. Trader Rekt Capital noticed Bitcoin was “on the verge of retesting the $65,000 level in a volatile manner” and needed to close above it each day to keep the price in the $65,000-$71,500 range.
The struggle to reclaim $65,000 comes amid a broader pullback in tech stocks and cryptocurrencies following solid U.S. GDP data. The tech-heavy Nasdaq Composite fell more than 1.2% in early trading on July 25 after GDP growth beat forecasts of 2.8% for the second quarter of 2024. Bitcoin traded around $63,800, failing to reverse its recent downtrend despite cooling PCE inflation data.
Correlation between Bitcoin and Nasdaq-100
Recent price movements highlight the growing correlation between Bitcoin and the Nasdaq-100 index, which has become increasingly evident 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 in a similar manner, leading to correlated price action. This has been evident in the recent sell-off and subsequent recovery in 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, influencing both sectors. Recent PCE data and its impact on rate cut expectations demonstrate this interconnectedness.
Technological developments can simultaneously impact tech stocks and Bitcoin. Innovations and advances in technology often have implications for both sectors, while regulatory changes and developments in the crypto space can impact both markets. The integration of blockchain technology into the tech sector further drives the correlation.
Investment trends are also contributing to the growing relationship between Bitcoin and tech stocks. The rise of institutional investment in Bitcoin has led to a greater correlation with traditional financial markets, especially tech stocks. As more institutional investors add Bitcoin to their portfolios, its price movements could align more closely 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.
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