Bitcoin and Nasdaq’s correlation is at its lowest since the FTX collapse

2023-03-15 11:53:07 ET

Clara Medalie, director of research at digital asset provider Kaiko, says Bitcoin (BTC/USD) currently shows the least correlation with the Nasdaq.

Medalie shared her market outlook during an interview with CNBC, highlighting Bitcoin’s recent rally in the wake of major shock waves in the banking sector as crypto-friendly banks Silvergate Bank, Silicon Valley Bank (SVB) and Signature Bank collapsed.

Bitcoin breaks lock-step correlation with Nasdaq

Bitcoin price movement in 2022 was largely in sync with stocks, with downward pressure catalyzed by rising interest rates that saw BTC and the Nasdaq highly correlated.

Earlier this year, when cryptocurrencies jumped higher amid a bear market rally, they did so alongside an upbeat stock market helped by a resurgent tech sector and expectations that the Federal Reserve would begin to wind down its rate hikes.

While cryptocurrencies continue to react to the Fed’s monetary policy, the past month shows that Bitcoin and the Nasdaq have not been so closely linked in 2023.

According to Medalie, the current correlation between Bitcoin and the US stock index is at its lowest level since the carnage that followed the collapse of the crypto exchange FTX in November.

“Bitcoin’s correlation with the Nasdaq today is at its lowest level since the FTX collapse. With FTX, it was a fairly idiosyncratic market event, so it fell only briefly. But it seems that actually since the start of the year we’ve seen a steady decline in this.”

The disconnect is just not with Bitcoin, but also with the entire asset class versus stocks, she noted, adding that cryptocurrencies suffered negatively in January and February. In the past week, the weak decorrelation has come as markets shake off the bearish sentiment, especially from the point of view of what was largely a regulatory crackdown in the US.

The surge for major stablecoin USD Coin (USDC) and Binance’s announcement that it would convert 1 billion Binance USD (BUSD) to Bitcoin, Ether and BNB have been positive price triggers, she added.

A look at the markets shows that Bitcoin is currently holding close to $25,000, down 4.5% in the last 24 hours. However, the BTC price has risen by 14% in the past month after a breakout to highs of $26,500 on Tuesday.

In comparison, the Nasdaq is also trading lower, about 1% down on the day and around -6% over the last 30 days. Year to date, the Nasdaq is up 8.6% as of 10:30 a.m. ET on Tuesday, while the price of Bitcoin has risen more than 56% in that time.

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