bitcoin It is once again behaving differently from the traditional risk asset complex, and the latest divergence may be sending an important signal.
The negative correlation between bitcoin and the Nasdaq 100 has often aligned with bitcoin market lows, and the current setup resembles several past turning points.
This is now the fourth time in the last five years that the two assets have entered negative territory with the 20-day correlation coefficient currently standing at -0.43. The pattern also resembles periods of negative correlation observed in summer 2021 and August 2024, both of which coincided with significant bitcoin lows. Although bitcoin is frequently described as a higher-beta leveraged technology asset that tends to outperform during risk periods and underperform during risk periods, the current divergence is notable.
Bitcoin fell as much as 36% from its October all-time high. In comparison, the Nasdaq 100 saw a maximum decline of just 8% and is now trading just 2% below its all-time high. Bitcoin has yet to recover like the broader tech sector has, which is currently 27% below its all-time high.
The previous example of negative correlation developed during the yen carry trade decline, which pushed bitcoin to around $49,000, a move that ultimately marked a local bottom. Before that, a negative correlation appeared in September 2023, when bitcoin was trading just below $30,000, followed by a rally to $40,000 by the end of the year. The first case occurred in May 2021 during China’s mining ban, when bitcoin fell from $60,000 to $30,000 before recovering to new highs in November 2021.
Together, these episodes show that the negative correlation between bitcoin and the Nasdaq 100 has often emerged near important turning points in bitcoin. While the current setup suggests another bottom may be forming, the timing of any bounce remains uncertain.
