With the correlation of Bitcoin proxy IBIT to the Nasdaq approaching 70%, historical patterns suggest that a significant divergence in performance may soon occur.
Bitcoin’s (BTC) correlation with the Nasdaq is nearing a threshold that has only been witnessed on two prior occasions, each time leading to a sharp 20% decline in BTC’s price, data from a Singapore-based blockchain analysis firm indicates.
In a recent post on X, the firm highlighted that the 30-day realized correlation between Bitcoin proxy IBIT and the Nasdaq may stem from factors like the recent adjustment in earnings expectations leading up to the Q1 earnings season, along with the persistent uncertainty regarding global economic conditions.
“This correlation illustrates the recent recalibration of earnings forecasts preceding Q1 earnings season, as well as continuous uncertainty and concerns generated by tariff negotiations. Consequently, Bitcoin is currently aligning with trends in the technology sector.”
The firm
Despite the prevailing trend, the firm warns that such elevated correlations are seldom sustained for extended periods, noting that “these high correlations have historically been fleeting, indicating that a performance divergence between Bitcoin and the Nasdaq might be imminent.” In the last two instances where the correlation reached this magnitude, Bitcoin’s price fell by over 20%, based on data from cryptocurrency price tracking platforms.
While the current correlation trend could indicate that Bitcoin might soon detach from the Nasdaq’s influence, there remains no definitive timeline or guarantee that such a divergence will occur.
At the same time, spot Bitcoin exchange-traded funds have seen a return to positive weekly inflows as BTC stabilized above the critical $85,000 support level, which analysts consider essential for a further upward movement. Markus Thielen from 10x Research highlighted in a report on March 23 that Bitcoin’s reversal indicators have turned positive, with the 21-day moving average currently at $85,200.