- During the ongoing sell-off in the market, BTC’s correlation with S&P 500 has risen to a one-year high.
- BTC’s realized volatility has risen by more than 50% since the start of this month.
The prices of risk-on asset classes fell sharply yesterday, shortly after the U.S Department of Labor released inflation data. The report suggested that the U.S consumer prices rose more than expected in April. At the time of writing, the global crypto market’s capitalization stood at $1.2 trillion, down by more than 10% over the past 24 hours.
Even though the annual consumer price growth in April (8.3%) was lower than that in March (8.5%), it was still higher than the forecast of 8.1%. With inflation fears still prevalent, the S&P 500, the benchmark index of the U.S stock market, closed 1.65% lower whereas NASDAQ (tech stocks’ index) closed 3.06% lower.
As a result of the current market conditions, cryptos are being treated similarly to stocks. Data from Skew reveals that during the ongoing sell-off in the market, BTC’s correlation with S&P 500 has risen to a 1-year-high. At the time of writing, the correlation stood at 76.1%, more than double the correlation seen on March 24.
Data from Skew also shows that the realized volatility of risk-on assets like stocks and cryptos has shot up significantly over the past two weeks. BTC’s realized volatility has risen by more than 50% since the start of this month whereas S&P’s volatility has risen by roughly 25%. On the other hand, Gold’s (XAU) volatility has remained flat during this period.
The U.S Federal Reserve (fed) is scheduled to raise interest rates five more times by the end of this year. Looking at the market reaction to the recent hike, we can see that market participants around the world are highly doubtful that the fed can manage a soft landing and control inflation while at the same time avoiding an economic slowdown.