Bitcoin decouples from Nasdaq amid ETF speculation

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Bitcoin has decoupled from the Nasdaq (NDX), having moved in tandem with Wall Street’s tech-heavy indexes for much of the past four years.

The 40-day correlation between Bitcoin and Nadaq is currently zero, indicating a lack of correlation between the two assets, according to data tracked by research provider Fairlead Strategies.

The correlation value is determined through a mathematical formula based on BTC’s index and price fluctuations over time. A correlation above 0.5 indicates that the two assets are consistent with each other and have a moderate positive relationship, while a correlation above 0.7 indicates a strong correlation. A negative -0.5 or lower number indicates the opposite.

The correlation between Bitcoin and Nasdaq is currently 0. Source: Fairlead Strategies

The correlation between Bitcoin and Nasdaq has remained positive since the beginning of 2020, peaking at 0.8 during the 2022 cryptocurrency bear market.

The recent decoupling of the two can be explained by the fact that since October, the crypto market has been entirely focused on the expected launch of a spot BTC ETF in the United States. The U.S. Securities and Exchange Commission (SEC) may approve nearly a dozen spot Bitcoin ETFs by January 10, which could open the door to widespread adoption of the asset class.

The collapse in correlation also means that Bitcoin can now serve as a diversification tool for investment portfolios. Fairlead Strategies expects Bitcoin to remain unaffected by the Nasdaq for some time.

Fairlead analysts, led by founder and managing partner Katie Stockton, said:

“We believe the correlation between Bitcoin and NDX is likely to remain low in the coming months given the opportunity for spot Bitcoin ETF approval and events such as the April halving.”

“Additionally, risk assets’ correlations in bull markets are typically lower than in bear markets.”