Why Bitcoin and Bitcoin stocks failed to join the global rally yesterday

Why Bitcoin and Bitcoin stocks failed to join the global rally yesterday

According to a report by finanzmarktwelt.de,
Following the latest inflation figures in the US, the stock markets recorded a significant increase, while Bitcoin and Bitcoin stocks fell against the trend. This caused confusion as Bitcoin typically benefits from improved liquidity prospects. In this context, Bitcoin's decline of around 3% since the publication of the US data is particularly striking. In comparison, the MSCI World global stock index rose 2% as markets speculated that the Federal Reserve could cut interest rates. The correlation between Bitcoin and the world stock index is now at minus 0.23, which is the most negative value since the start of the pandemic in 2020. Normally, such a development would be accompanied by an increase in speculative risk appetite, which is also promising for cryptocurrencies. However, Bitcoin's gains were tempered in part by expectations that regulators will allow U.S. exchange-traded funds to invest directly in the token. This led to some caution regarding the further development of the crypto asset. Market analysts have pointed to potential weakness in the Bitcoin market, particularly in light of expected ETF approvals, which could lead to a buy-the-rumor-sell-the-facts reaction. In this context, Bitcoin temporarily fell below the $35,000 mark on Wednesday, while the second-place token Ether remained just below $2,000.

The unexpected decline in Bitcoin and Bitcoin stocks amid the rising stock market can be attributed to various factors. For one thing, the expected approval of ETFs may have already anticipated the market, leading to profit-taking. Additionally, uncertainty surrounding Bitcoin's future development and regulatory issues may have contributed to investors becoming more cautious. These developments could cause Bitcoin to decouple from the stock market in the short term and impact the long-term performance of the crypto asset. It remains to be seen how the approval of ETFs and further regulatory decisions will impact the market.