The data shows that Bitcoin’s correlation with the Nasdaq has fallen to the lowest since December 2021 as BTC continues its strong momentum.
Bitcoin’s 30-day correlation to the Nasdaq dips to just 0.29
According to the latest weekly report from Arcane Research, movements in US markets become less relevant for BTC. The “30 day correlationis an indicator that measures how well Bitcoin and another given asset have performed over the past month.
When the value of this metric is positive, it means that BTC has reacted to changes in the price of the other asset by moving in the same direction. On the other hand, negative values imply that BTC has exhibited opposite price action relative to the asset.
Naturally, the correlation is precisely zero, suggesting that the prices of the two assets are not related in any way.
Now, here is a chart that shows the 30-day correlation trend between Bitcoin and Nasdaq over the past two years:
Looks like the value of the metric has seen a plunge in recent days | Source: Arcane Research's Ahead of the Curve - January 17
As the chart above shows, Bitcoin’s 30-day correlation with the Nasdaq was at a high positive value for most of 2022, suggesting that BTC was then approaching US stocks.
The report notes a few reasons why the two assets are so correlated. First, institutional investors, who treat BTC as a risky asset, have seen an increasing presence in the market during this period. These investors are sensitive to macro movements and thus contribute to Bitcoin’s strong correlation with the stock market.
Second, growing companies like Tesla have held large amounts of Bitcoin exposure over the past year. This presence of public companies also naturally led BTC to link up with the Nasdaq.
The third factor was the sale made by minors. This cohort was under pressure from rising interest rates (because they had gone into deep debt to expand their business) and rising energy costs, which left them with no choice but to sell their reserves. of BTC.
The fourth and final reason was the short-sighted decisions taken by crypto companies, which prioritized growth over sound finances in the low interest rate regime of the past. 2022 is extended bear market left most of these companies with huge losses, forcing some of them into bankruptcy.
More recently, however, Bitcoin’s correlation with the Nasdaq has dropped significantly, as the metric’s value is just 0.29, the lowest level seen since December 2021, over a year ago.
“Compared to 2022, public companies are holding significantly less BTC, miners have less BTC to sell, and several institutional players have exited the market,” says Arcane Research. “All of these factors are in favor of a softening of the correlations.”
As of this writing, Bitcoin is trading around $21,200, up 22% in the past week.
The value of the crypto continues to move sideways | Source: BTCUSD on TradingView
Featured image of Maxim Hopman from Unsplash.com, charts from TradingView.com, Arcane Research