Last year, bitcoin moved in tandem with the stock market as well as the bond market as inflation applied downward pressure to most assets. In the recent rally, bitcoin is doing the same, tailing indexes like the Nasdaq 100 as it moves higher amid the anticipation of fewer rate hikes.
That remains to be seen, however, as the U.S. Federal Reserve could reverse course if it senses that it doesn’t quite have inflation under control. If that’s the case, more volatility could be ahead for the stock market, which could translate to volatility in the cryptocurrency market.
“On days when technology stocks trade higher, cryptocurrencies, including bitcoin (BTC) and ether (ETH), are likely to do the same,” a Coindesk article noted. “Conversely, a decline in technology stocks could drag the crypto market lower.”
That said, macroeconomic catalysts like inflation reports and interest rate decisions are likely to move cryptocurrencies again this year. A peek at the Nasdaq 100 may offer market-watchers an idea of what the cryptocurrency market might be doing.
“The renewed positive correlation implies increased sensitivity of cryptocurrencies to macroeconomic data releases like the U.S. consumer price index (CPI), which injects volatility into stock markets,” the article added further. “The CPI days were among the most volatile for U.S. stocks last year, according to MarketWatch.”
Get Bitcoin Exposure on a Regulated Exchange
Getting bitcoin exposure doesn’t mean that investors must 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 in order to get cryptocurrency exposure to major coins like bitcoin.
Exchange traded funds (ETFs) can allow investors to get in on the bitcoin price action without investing directly in the digital currency itself. Consider the ProShares Bitcoin Strategy ETF (BITO) and the ProShares Short Bitcoin Strategy ETF (BITI).
For the bulls, BITO builds capital appreciation through its bitcoin futures contract use, allowing investors to get 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 off price declines in bitcoin.
For more news, information, and analysis, visit the Crypto Channel.