Bitcoin (BTC) has decoupled from the Nasdaq (NDX), after moving in tandem with Wall Street’s stock-heavy index for most of the past four years.
The 40-day correlation between Bitcoin and Ndaq is now zero, indicating no correlation between the asset classes, according to data tracked by research firm Fairlead Strategies.
The correlation value is determined with the help of a mathematical formula based on the indicator and Bitcoin price movements over time. A correlation above 0.5 represents a fairly strong positive relationship where the two assets are in harmony, with readings above 0.70 indicating a strong relationship. Negative numbers of -0.5 or less indicate otherwise.
The correlation between Bitcoin and Nasdaq has been consistently positive since early 2020, peaking at 0.8 during the 2022 cryptocurrency bear market.
The recent disconnect between the two can be explained by the fact that the cryptocurrency market has, since October, been squarely focused on expectations for the launch of a spot BTC ETF in the US, and the SEC is likely to make a decision on nearly a dozen spot ETFs. . Applications are due by January 10, which could open the doors to widespread adoption of the asset class.
The collapse of the correlation also means that Bitcoin can now act as a portfolio diversifier. Fairlead Strategies expects Bitcoin to remain non-compliant with the Nasdaq for some time.
“We believe correlations between Bitcoin and the NDX will likely remain low in the coming months given the chance of events such as Bitcoin exchange-traded fund approval and the halving in April,” said analysts at Fairlead, led by founder and managing partner Katie Stockton. In a note to customers on Monday.
“Also, risk assets generally see lower correlations in bull markets than in bear markets,” the analysts added.