According to the latest data released by the U.S. Bureau of Labor Statistics last Wednesday, the Consumer Price Index (CPI) in October fell to 2.6% year-on-year over the past 12 months. This change may indicate that a full-scale bull market in dollar-denominated assets is about to officially begin in 2025.
It is worth noting that the increase in CPI, an important indicator to measure the change in the purchasing power of the US dollar, also means an increase in the prices of a basket of consumer goods in our daily lives.
The CPI continued to decline from March to September, prompting the US Federal Reserve to cut interest rates in September. After the rate cut, the price of Bitcoin began to recover and continued to rise until October, while the stock market on Wall Street also rose. Major US stock indices such as the S&P 500 hit record highs this month and last month.
It is particularly noteworthy that after the US election on November 5, the price of Bitcoin soared to a new high. On Wednesday, the largest digital asset hit an all-time high, breaking through the $93,000 mark.
Fed cuts rates to fight deflationary pressures
Inflation fell from 3.5% to 2.4% in September, and the year-on-year change has fallen by 31.42% since March. During the same period, the S&P 500 rose 8.59% against the trend, while the price of Bitcoin fell slightly by 1.53%.
But now, with the rebound in inflation rates, the market is generally concerned about whether Bitcoin can continue to set new historical highs. In its latest report on Wednesday, analysts at Santiment said that by 2025, the price of Bitcoin is expected to break through six figures and reach a high of $150,000 to $200,000.
In addition, last December, Bitcoin ETF issuer VanEck predicted that the price of Bitcoin would reach $100,000 by the end of 2024. Based on the above analysis, Bitcoin is expected to achieve this important milestone within the time frame predicted by analysts.
Is the correlation between Bitcoin and the stock market recovering?
As the dollar continues to increase, Bitcoin and the stock market seem to have price movements that are correlated again. Bitcoin's 30-day Pearson correlation coefficient reached a 44-month high of 0.89 on September 27, then fell to 0.49 on the eve of the US election, and then rebounded to 0.80 when the US Department of Labor released the latest CPI data.
In the context of Bitcoin and the stock market, if the 30-day Pearson correlation coefficient is high (close to 1 or -1), it indicates that the Bitcoin price and the stock market index have strong synchronization in the last 30 days. If the coefficient is close to 0, it means that there is no obvious linear relationship between the two, and their price changes are relatively independent.
This trend is partly attributed to some large institutional investors starting to actively deploy in the Bitcoin market. Lark Davis, a well-known Bitcoin investment analyst, pointed out that asset management giant BlackRock has been increasing its holdings of Bitcoin.
Separately, Wall Street’s Bitcoin ETF sales exceeded $1.67 billion in the week between November 11 and November 14. While institutional investors saw a net outflow of $400 million on Thursday, BlackRock investors were happy to buy when prices were low, buying a net $126 million worth of Bitcoin on Thursday.
One Ethereum analyst commented on Davis’ post: “BlackRock gets it.” This shows that despite market volatility, some large institutional investors remain confident in the long-term value of Bitcoin and actively position themselves when the market adjusts.
Conclusion:
In summary, investors need to pay close attention to CPI data, the policy trends of the Federal Reserve, and the correlation between Bitcoin and the stock market, and these factors also jointly influence the next trend of the market.
As these economic indicators continue to change, keeping abreast of the market and investing prudently will be the key for every investor to succeed in the coming bull market.
