Bitcoin Price Approaches $65K as US Stocks Recover from Surge

Key conclusions

Bitcoin rose to $65,000 as US stocks recovered recent losses.
Economic data such as the PCE index and unemployment claims have had an impact on bitcoin price fluctuations.

Bitcoin’s price has returned to near $65,000 and U.S. stock markets have rebounded from their worst day of 2022, with investors closely watching key support levels and the growing correlation between cryptocurrency and tech stocks.

Bitcoin rebounded above $65,000 after Wall Street opened on July 25, as U.S. stocks rebounded from heavy losses. Data from TradingView showed Bitcoin (BTC) rebounding after initial selling pressure from algorithmic trading.

Popular trader Skew singled out one entity in particular as an “aggressive seller,” explaining that these actions “dropped prices dramatically before large passive buyers came in.” Skew suggests that the price momentum was fueled by multiple-covering positions until the market became net-long.

The modest rebound in U.S. stocks followed heavy 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 fell 2%. A similar pattern was seen in Bitcoin, which hit local lows of $63,424 the same day.

Macroeconomic data increases cryptocurrency volatility

Macroeconomic data releases in the U.S. added complexity to the market outlook. The Personal Consumption Expenditure (PCE) index came in below expectations, potentially supporting risk assets by improving the chances of interest rate cuts. Both initial and current jobless claims were below expectations, indicating a resilient labor market and reducing bets on near-term rate cuts from the Federal Reserve. For context, the Fed’s next meeting is scheduled for July 31.

Analysts have highlighted the importance of Bitcoin maintaining the $65,000 level, which represents the realized price of a short-term holder. Trader Rekt Capital noted that Bitcoin is “in the process of retesting the $65,000 level in a volatile manner” and needed to close above it on a daily basis to maintain the price in the $65,000–$71,500 range.

The fight to reclaim $65,000 comes amid a broader pullback in tech stocks and cryptocurrencies following strong U.S. GDP data. The tech-heavy Nasdaq Composite fell more than 1.2% in early trading on July 25 after GDP growth beat estimates of 2.8% for the second quarter of 2024. Bitcoin traded around $63,800, failing to reverse its recent downtrend despite lower PCE inflation indicators.

Bitcoin and Nasdaq-100 Correlation

The recent price swings underscore the growing correlation between Bitcoin and the Nasdaq-100 Index, which has become increasingly evident in recent years. Several factors are at play in this relationship.

Sapphire

Market sentiment plays a key role in driving simultaneous moves in tech stocks and Bitcoin. Periods of risk-on or risk-off sentiment can affect both asset classes in similar ways, leading to correlated price action. This was evident in the recent sell-off and subsequent rally in both markets.

Macroeconomic factors such as interest rates, inflation, and economic indicators affect both Bitcoin and tech stocks. Central bank policies and economic stimulus measures can affect market liquidity and investor behavior, affecting both sectors. The recent PCE data and its impact on interest rate cut expectations demonstrate this interdependence.

Technological advancements can simultaneously impact tech stocks and Bitcoin. Innovation and technological advancements often impact both sectors, while regulatory news and developments in the cryptocurrency 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 link between Bitcoin and tech stocks. Growing institutional investment in Bitcoin has led to a higher correlation with traditional financial markets, particularly tech stocks. As more institutional investors add Bitcoin to their portfolios, its price movements could become more closely tied to broader market trends.

The deepening correlation between Bitcoin and the Nasdaq-100 creates 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.