Bitcoin (BTCUSD) Prices Drop to $56,000 Amid Broader Stock Sell-Off

Bitcoin prices (BTCUSD) dropped to $56,000 Wednesday morning amid a broader stock sell-off led by declines in market heavyweight Nvidia (NVDA) before clawing

Bitcoin prices dropped to $56,000 Wednesday morning amid a broader stock sell-off led by market heavyweight Nvidia (NVDA), though it later recovered some of those losses.

Investors are also getting skittish about the cryptocurrency, with bitcoin exchange-traded funds seeing $287.8 million in outflows on Tuesday, marking the fifth straight day of net outflows, according to Farside Investors.

The recent bitcoin price decline also coincides with sell-offs in the Nasdaq and S&P 500, leading some to question the crypto asset's efficacy as a hedge.

According to data from The Block, bitcoin has moved more in tandem with the traditional stock market than gold lately, despite its touted use case as a safe-haven asset.

Bitcoin's Pearson correlation with the Nasdaq went as high as 0.9 in June (on a scale from 0 to 1) and came into the spotlight amid the equities sell-off roughly one month ago.

While bitcoin's correlation with stocks has decreased slightly since then, it remained above 0.5 as of last week, while the crypto asset's correlation with gold became slightly inverted.

Approval of spot bitcoin ETFs and optimism around the bitcoin halving that occurred earlier this year propelled bitcoin's price to a new high of over $73,000 in March. But the Federal Reserve could play a larger role in where bitcoin heads next.

As the Fed raised rates to combat inflation, yields on U.S. Treasurys rose and became more attractive to investors than riskier assets like stocks and bitcoin. A rate cut could benefit those assets as yields come down.

However, analysts at crypto exchange Bitfinex are predicting more pain for bitcoin, with a potential 15% to 20% bitcoin sell-off in the cards following a rate cut from the Federal Reserve later this month.

“Since early August, Bitcoin has gained over 32%, driven by traders largely anticipating dovish commentary by the Federal Reserve,” the Bitfinex analysts said in their report. “A more aggressive 50 basis point cut might cause an immediate price spike but could be followed by a correction as recession concerns escalate.”

Bitcoin was recently trading above $58,000 in recent торгов.

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