The correlation between bitcoin and the Nasdaq remains extraordinarily tight with both falling today. Bitcoin is down $575 to $19862 and the Nasdaq lower by 0.3%. The daily correlation is now running at 0.894, which is remarkably tight, though the magnitude of the moves certainly varies.
This is the third day of declines in a row for bitcoin and puts it right in the middle of the range since mid-June. Last week, it appeared that bitcoin might attempt a breakout to the upside but it failed to hold above $22,000 and has now sank back below $20,000.
In terms of trading, there's a potential range-trade but that risks more false breakouts and churn. Instead, we wait for a clear breakout. Like in June and May, when there are real breakdowns they are dramatic. Bitcoin fell for 12 straight days in June as the Luna and 3AC implosion hit.
At some point, you would have hoped for a larger bounce from that but instead it's consolidation. In general, that's not a great sign but there have been a series of higher lows in the past months, so there's something to build from.
Ultimately, the correlation with the Nasdaq is also a tell. If we see a new breakdown in one it will very likely mean a breakdown in both. The next potential catalyst is the Wednesday US CPI report. Another upside surprise in prices would lead the market to price in more Fed hikes and that would kick off a flight to safety.
The data is due at 8:30 am ET.
