Nvidia's Surge and Bitcoin's Breakout: A Fleeting Connection?

Nvidia's historic achievement of reaching a $4 trillion market capitalization may have been the catalyst Bitcoin needed to escape its recent trading range. Bitcoin briefly touched an all-time high, addressing concerns about a lack of drivers in the crypto market.

Bitcoin's Reaction

Currently, Bitcoin is trading around $110,900, after rallying during US trading hours. Analysts previously noted a quiet market with declining on-chain transactions, minimal miner revenues, and suppressed fees. These factors were interpreted as signs of a mature market dominated by large institutional transactions and long-term holders.

Correlation Concerns

While Nvidia's surge and Bitcoin's rally coincided, data suggests the correlation between the two is weakening. The correlation peaked above 0.80 during the AI-driven enthusiasm of early 2024, but recent data shows a dip to around 0.36. This potential decoupling suggests investors may be shifting focus.

Despite the weakening correlation, Nvidia's milestone acted as a potential trigger for Bitcoin's breakout. However, a correction in Nvidia's share price is possible. The decreasing correlation could mean Bitcoin remains resilient if that happens.

CBDC Developments: Australia and Canada Diverge

Australia's central bank digital currency (CBDC) initiative, Project Acacia, is moving forward with real-world application trials in tokenized asset markets. Major banks, fintechs, and infrastructure firms are participating in pilots exploring settlement across asset classes such as bonds, carbon credits, and trade receivables.

Meanwhile, the Bank of Canada has shifted its focus away from developing a retail CBDC due to concerns about government surveillance.

Market Movements

• BTC: Hovered near $109,000, showing resilience amid dormant wallet activity and regulatory uncertainty.
• ETH: Closed up 2.8 percent, signaling continued bullish positioning.
• Gold: Prices extended losses due to reduced Fed rate cut bets and a strong US dollar.
• Nikkei 225: Opened mixed amid global trade concerns.
• S&P 500: Stock futures were mostly flat.

Key Takeaways

• Nvidia's $4 trillion milestone may have triggered Bitcoin's breakout, but the correlation between the two is weakening.
• Australia is progressing with CBDC trials, while Canada is stepping back due to privacy concerns.
• Bitcoin and Ethereum show resilience amidst regulatory uncertainties.