What’s good for equity investors appears to be beneficial again for cryptocurrency enthusiasts, with Bitcoin rebuilding its correlation with technology stocks.
After a breakdown in the directional relationship between the two asset classes in June, the largest digital currency is back to mirroring the price moves of surging Nasdaq 100 Index. The tech bellwether has rallied more than 40% this year amid the exuberance over artificial intelligence.
“Bitcoin has this large overreaction to news events, and in the absence of that, I would expect it to correlate more with stocks,” said Josh de Vos, research lead of crypto analytics firm CCData. “I can see the correlation trending up in the next few months.” The 30-day correlation coefficient for Bitcoin and the Nasdaq 100 is back to almost 0.4 versus negative 0.1 or so in June and July. A reading of 1 indicates assets are moving in lockstep, while minus-1 would show they’re moving in opposite directions.
Back in the pandemic era of huge stimulus both crypto and tech stocks surged in tandem. Correlations between Bitcoin and a variety of traditional assets weakened in the wake of a 2022 crash in virtual coins that ended up diminishing investor interest in the market. Bitcoin gained for a third consecutive day, rising as much as 2.2% to $26,692. The Nasdaq 100 increased 0.8%.
One irony of the resumption of the in-tandem moves as prices rise is that Bitcoin was originally pitched by enthusiasts as being uncorrelated with traditional financial assets.
