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Bitcoin’s correlation with Nasdaq drops to 1-year low; Here’s what it means

Bitcoin’s correlation with Nasdaq drops to 1-year low; Here’s what it means

The relationship between the stock market and the cryptocurrency sector has been a matter of interest for quite some time now, and recently the correlation between Bitcoin (BTC), the largest digital asset by market capitalization, and the Nasdaq 100 index has recorded its lowest levels in a year.

As it happens, the correlation of daily returns between the Nasdaq 100 and Bitcoin has dropped to the lowest level since the United States Federal Reserve signaled rates hiking at the beginning of 2022, the crypto trading and investment platform CoinShares said on March 8.

Nasdaq 100 and Bitcoin correlation. Source: CoinShares

Specifically, the (de)correlation level between the two at press time stood at 34%, close to that from February 2022, increasing soon after. According to the platform, the current “decorrelation could continue as the Fed rate hikes slow, further anchoring Bitcoin as an interest rate-sensitive asset.”

Essentially, Bitcoin previously had the tendency to move in the same direction as the large companies listed on the Nasdaq 100 index, leading some financial experts to see this as an argument against the digital asset’s role as a diversifier. However, the recent decorrelation might prove them wrong.

Bitcoin price analysis

Indeed, as things stand, the representative decentralized finance (DeFi) asset is currently changing hands at the price of $21,701, which demonstrates a decrease of 1.44% on the day, in addition to the losses of 8.18% and 4.76% on its weekly and monthly charts, respectively.

Bitcoin 7-day price chart. Source: Finbold

Meanwhile, the crypto market has continued to crash under significant selling pressure and the increasing ‘FUD’ (Fear, Uncertainty, and Doubt) in recent days, which have together managed to pull its market cap to decline below the $1 trillion psychological threshold. 

Adding to the FUD, the U.S. government has moved $1 billion worth of Bitcoin it seized from the anonymous darknet marketplace Silk Road in 2021 and 2022, propping up fears of an imminent BTC dump, which could exert even more pressure on the market and see BTC lose more support levels. 

However, this could also represent a good opportunity to buy the maiden crypto before its price increases again, as Bitcoin has been demonstrating a steady pattern of optimal times for decision-making in crypto trading strategies – buy, hodl, and sell – over the past years.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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