Cloud Hosting

It seems to have become a trend that once journalists start focusing on a pattern in the financial market, it stops working. The same has happened with cryptocurrencies.

In mid-May, it was reported that the 90-day correlation coefficient between Bitcoin and the tech-heavy Nasdaq 100 index reached 0.46, the highest level since late August.

However, over the past week, while the index of major tech companies grew by more than 4.4%, theBTCUSD declined by 0.95%.

This begs the question: what is causing the loss of correlation, and how long will it last?

The decoupling started before the FOMC rate meeting and intensified after Jerome Powell's speech, in which the Fed chairman again made hawkish comments.

Specifically, he said that recent data indicate "some easing" of inflationary pressures but not yet enough to start easing monetary policy.

The main surprise was that the Fed's updated forecast calls for one rate cut in 2024, down from three cuts in March, as the labor market remains strong and the economy resilient.

Where did the money go if not into cryptocurrencies?

Although the regulator's signal could have been more encouraging, investor enthusiasm for the stock market, especially for technology stocks, has remained strong.

Apple's WWDC presentation also contributed, and investors reacted positively, albeit belatedly. The rise in stock prices began the day after the AI product announcement.

Small-cap stocks represented by the Russell 2000 index also remained subdued, along with the cryptocurrency market. The index still sits nearly 18% below its all-time high of 2021.

What's next?

In the case of the stock market, strategists at Goldman Sachs Group have raised their year-endforecast for the S&P 500 index to 5,600 points from the previous 5,200.

They justified their decision to upgrade forecasts for the third time in less than a year with a lower-than-average level of negative earnings and a higher price/earnings ratio.

However, for that to happen, inflation data must continue on a downward path, and the economy must show no signs of slipping into negative growth territory.

Will cryptocurrencies follow the same path?

For now, all available investor funds seem to flow into the "Magnificent 7", leaving little room for digital assets. Even the recent low trading volumes have not helped.

However, many experts maintain a positive outlook, especially for Bitcoin, forecasting targets above $100,000. Some even expect $1 million per coin.

Approach these outlooks with caution. Robert Kiyosaki is also known for his consistent optimism about Bitcoin going "to the moon," but we're still waiting for that to happen...

Disclaimer:The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Read the rest here:
Correction in the cryptocurrency market: sign of trouble ahead? - Kitco NEWS