Bitcoin's Negative Correlation with Nasdaq Persists, Signaling Potential Bottom Formation
Bitcoin's 20-day correlation with the Nasdaq 100 index currently stands at -0.43, marking the fourth episode of negative correlation within the past five years. Historically, these periods of negative correlation have coincided with significant lows in Bitcoin's price, notably in July 2021, September 2023, and August 2024.
As of now, Bitcoin has declined about 27% from its all-time high in October, while the Nasdaq 100 is roughly 2% below its record peak. Previous episodes of divergence between Bitcoin and the Nasdaq often preceded Bitcoin recoveries, suggesting that the current negative correlation could indicate a potential bottom forming in the cryptocurrency's market.
For context, the most recent negative-correlation episode took place during the unwinding of the yen carry trade, which pushed Bitcoin to approximately $49,000, where a local bottom was established. The first such instance occurred in May 2021 amid the China mining ban, with Bitcoin falling from $60,000 to $30,000 before subsequently recovering. In September 2023, Bitcoin approached $30,000 before rallying to around $40,000 by year's end. Similarly, August 2024 coincided with meaningful Bitcoin lows, reinforcing this pattern of turning points.
While this divergence between Bitcoin and Nasdaq could signal a market bottom, the exact timing of any rebound remains uncertain.
