Bitcoin Breaks Away from Nasdaq Amidst ETF Rumors

• Bitcoin Uncouples from Nasdaq: An Analysis
• Understanding Bitcoin-Nasdaq Correlation
• A Historic Overview of the Correlation
• The Reason behind the Decoupling
• Implications of the Breakdown
• Experts' Take on the Correlation

Bitcoin Uncouples from Nasdaq: An Analysis

The bond between Bitcoin$42,260 -0.64% (BTC) and Nasdaq (NDX), the tech-centric equity index of Wall Street, which has been mainly persistent over the previous four years, has recently diverged. Current data, monitored by research firm Fairlead Strategies, indicates that the 40-day correlation between these two asset classes is currently nonexistent, standing at zero.

Understanding Bitcoin-Nasdaq Correlation

The degree of correlation is ascertained via a mathematical formula, which takes into account the price fluctuations of the index and BTC over a given period. An above-0.5 correlation implies a relatively strong positive relationship, with the two assets moving in harmony. A correlation exceeding 0.70 implies an even more robust connection. A negative correlation of -0.5 or less indicates the contrary. As of now, this correlation stands at zero.

A Historic Overview of the Correlation

The correlation between Bitcoin and Nasdaq has maintained a positive trend since the early months of 2020, reaching a high of 0.8 during the 2022 crypto bear market.

The Reason behind the Decoupling

The recent divergence can be accounted for by the crypto market's focus since October, which has been primarily on the anticipated launch of a spot BTC ETF in the U.S. It is projected that the Securities and Exchange Commission will decide on nearly a dozen spot ETF applications by January 10, which could facilitate more widespread acceptance of this asset class.

Implications of the Breakdown

The breakdown in correlation signifies Bitcoin's potential as a portfolio diversifier. Fairlead Strategies forecasts that Bitcoin's indifference to Nasdaq will be sustained for a period.

Experts' Take on the Correlation

We anticipate that the correlations for Bitcoin and the NDX are likely to remain low over the upcoming months due to potential events, such as the approval of a spot Bitcoin ETF and the halving in April, opined analysts at Fairlead, spearheaded by founder and managing partner Katie Stockton, in a note to their clients on Monday.

The analysts further stated, Risk assets usually exhibit lower correlations during bull markets as opposed to bear markets.

Edited by Jonathan Stoker