Bitcoin Is More Correlated With Tech Stocks Than Ever, Which Isn’t Exactly Ideal

Bitcoin Is More Correlated With Tech Stocks Than Ever, Which Isn’t Exactly Ideal
Reda Farran, CFA

almost 2 years ago1 min

Bitcoin and the tech-heavy Nasdaq 100 have increasingly been moving in tandem: the 90-day correlation between the two shows the relationship has been getting stronger since 2020, hitting a record high of 60% this week.

While that would be good news for crypto investors if the Nasdaq were rallying, it isn’t: the index is down 13% this year. After all, the Federal Reserve’s big shift toward aggressive monetary tightening – with higher interest rates and a reduction in its holdings of government bonds – is weighing on the index, and so are increasing worries that a US recession is looming.

Bitcoin’s similarly down 13% this year, but there are two more worrying signs here for the cryptocurrency. For one, the high correlation between bitcoin and the Nasdaq suggests that investors are less likely to buy into the crypto for diversification. And for another, it implies that any more of a fall in the stock market may drag down bitcoin and the wider crypto sector.

That’s exactly how Arthur Hayes sees things playing out: the billionaire co-founder of crypto trading platform BitMEX reckons a tech rout could drive bitcoin’s and ether’s prices to $30,000 and $2,500 respectively by June. That’s why he’s bought put options expiring in June on the two coins as a form of “crash protection”. And if you’re worried too, you might want to do the same…

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