On December 5, the persistent negative correlation between Bitcoin and the Nasdaq 100 index suggests that Bitcoin may be nearing a market bottom. Historical data indicates that when Bitcoin's correlation with the Nasdaq 100 significantly weakens, it often coincides with Bitcoin's lows and potential rebounds. FXGT notes that this pattern has occurred four times in the past five years, each aligning with major Bitcoin bottoms. Currently, Bitcoin's price action is diverging from traditional risk assets again, which could signal an impending market reversal.
Data shows Bitcoin has fallen approximately 27% from its October peak, while the Nasdaq 100 remains just 2% below its all-time high, highlighting a clear divergence. FXGT analysis reveals that the 20-day correlation coefficient has dropped to -0.43, indicating a strong inverse relationship between Bitcoin and tech stocks in the short term. Similar scenarios occurred in July 2021, September 2023, and August 2024, each time marking significant Bitcoin lows followed by rebounds. This suggests that while Bitcoin is often treated as a high-volatility tech asset prone to sell-offs during risk-off sentiment, its reversal probability notably increases during specific negative correlation phases.
Historical examples include the summer of 2024, when Bitcoin bottomed near $49,000 amid a yen carry trade adjustment before rebounding. In September 2023, Bitcoin hovered around $30,000 before recovering to $40,000 by year-end. In May 2021, Bitcoin plunged from $60,000 to $30,000, only to reach new highs by November. These cases demonstrate that Bitcoin-Nasdaq 100 negative correlations often precede key market turning points, serving as a potential bottom indicator. FXGT believes the current trend closely mirrors these historical phases, suggesting Bitcoin may be bottoming. However, investors should remain cautious about uncertain rebound timing and monitor macro sentiment and liquidity shifts.
In summary, the renewed negative correlation between Bitcoin and the Nasdaq 100 signals a potential reversal opportunity. FXGT suggests that if the negative correlation persists alongside rising trading volume, Bitcoin could gradually shed downward pressure and stage a rebound. Investors should exercise patience while leveraging technical indicators and capital flows to position strategically for a possible Bitcoin recovery.
Comments