In a notable divergence, Bitcoin (BTC) has shifted away from its historical correlation with Nasdaq (NDX), marking a significant departure from their previously entwined trajectory observed over the past four years.
Data gathered by research provider Fairlead Strategies points to a 40-day correlation of zero between Bitcoin and Nasdaq, indicating a newfound lack of interrelationship between these asset classes.
Correlation values, determined by mathematical formulas tracking price movements over time, are indicative of the alignment between these assets. A correlation above 0.5 signifies a moderately strong positive relationship, while readings surpassing -0.70 indicate a robust connection. Conversely, negative figures at or below 0.5 suggest otherwise.
This divergence marks a contrast from the consistently positive correlation between Bitcoin and Nasdaq since early 2020, peaking at 0.8 during the 2022 crypto bear market.
Analysts attribute this decoupling to the crypto market’s intense focus since October on the imminent decision regarding nearly a dozen spot Bitcoin ETF applications by the Securities and Exchange Commission (SEC), according to CoinDesk. In fact, anticipation for a potential ETF launch in the U.S. has fueled market expectations, potentially opening avenues for widespread adoption within the asset class.
The breakdown of this correlation heralds Bitcoin’s newfound potential as a portfolio diversifier. Analysts at Fairlead Strategies anticipate Bitcoin to sustain its detachment from Nasdaq in the coming months, highlighting the anticipation surrounding a spot Bitcoin ETF approval and the upcoming halving in April as key catalysts.
“Correlations between Bitcoin and the NDX are likely to remain subdued, given the potential events such as a spot Bitcoin ETF approval and the halving in April,” noted analysts led by Katie Stockton, the founder, and managing partner at Fairlead, in a client briefing.
The analysts further underscored that in bull markets, risk assets typically exhibit lower correlations compared to bear markets, contributing to the sustained divergence between Bitcoin and Nasdaq.
As Bitcoin breaks free from its longstanding correlation with Nasdaq, this divergence marks a notable shift in the relationship between traditional equity markets and the cryptocurrency sphere. The impending decisions on spot Bitcoin ETFs and the upcoming halving in April loom as pivotal factors influencing Bitcoin’s trajectory.
With the crypto landscape evolving rapidly, this detachment from Nasdaq signals Bitcoin’s potential to operate independently and emerge as a fully distinct asset class, presenting new opportunities and dynamics for investors and market participants to navigate in the coming months.
