While the crypto and stock markets both remain bearish, Bitcoin’s correlation with stocks is close to its lowest point this year. The 40-day correlation between the largest cryptocurrency and the Nasdaq 100 index is now below 0.50, according to Bloomberg data.
Bitcoin is trading for $20,712 at the time of writing, a 2.5% increase in the past 24 hours according to CoinMarketCap. In contrast, U.S. stocks were hit hard on Thursday as investors worry about the Federal Reserve continuing to hike interest rates. And it isn’t just the tech-heavy Nasdaq: global equities markets also took a beating on Thursday—along with oil—as more investors move towards holding onto their greenbacks.
Correlation with the Nasdaq is measured on a -1 to 1 scale: -1 means the prices always move in opposite directions; 1 means they move together. Today, Bitcoin is at its lowest correlation with the Nasdaq since early January.
This is a very different story from as recently as April, when its 30-day correlation with the Nasdaq was at its highest level in over a year.
The correlation is still positive, which means that Bitcoin and tech stocks still move in similar directions. But if the correlation continues to weaken, it might be taken as a sign crypto has seen the bottom and is ready to rebound.
For most of the pandemic, Bitcoin has moved in the same direction as stocks. Right now it is down nearly 70% from its all-time high last November near $69,000. This is largely because crypto is seen as a risky asset by many big investors, and we are in a risk-off environment as sky-high inflation hits virtually every country on the planet. Political uncertainty with Russia’s war in Ukraine and supply chain chaos from China make a recession seemingly imminent.
Since 2020, Bitcoin had been going more mainstream than ever as major companies like MicroStrategy and Tesla added it to their balance sheets and even previous Wall Street skeptics changed their tune, leading Bitcoin to perform like a tech stock. Until it crashed in May.
Could the crypto rebound be in full swing?
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