The correlation between Bitcoin and the Nasdaq stock market, which had previously tended to rise and fall together, has recently turned negative. When the Nasdaq surged in mid-November due to positive economic factors, Bitcoin traded sideways and fell. This suggests investors are now distinguishing between stocks and cryptocurrencies, unlike a few years ago when their movements were more closely linked. The crypto crash of 2022 left its mark, making investors less likely to view Bitcoin as just another investment to put money into if other markets are doing well.

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2. It used to be that when you were trading
Bitcoin that one of your guides could be
the Nasdaq market. That was because
Bitcoin and the Nasdaq tended to rise and
fall in tandem.

3. The Nasdaq market reliably rises and falls
with stock fundamentals, as well as market
sentiment. Its correlation with Bitcoin was
useful because Bitcoin does not have the
same sorts of fundamentals. However,
recently that correlation has turned
negative. What happened to the Bitcoin
stock correlation? How does this affect
Bitcoin trading?

4. Stock Market Soars While Bitcoin Slumps

5. If we look at Bitcoin and the Nasdaq market
from November 9 to November 15, 2023
you see that the Nasdaq market surged. It
was a “buy everything” moment according
to commentators. Meanwhile Bitcoin
traded sideways and then fell on the 14th
before recovering on the 15th.

6. Why did Nasdaq as well as the Dow Jones
Industrial Average and the S&P 500 all
soar? Inflation is coming under control so
the US Federal Reserve is probably done
raising interest rates. And the US House of
Representatives passed a bill to forestall a
government shutdown due to the debt
ceiling.

7. These factors do not directly affect Bitcoin
but, when Bitcoin tracks with the Nasdaq
one would expect to have seen it rally
along with stocks. That did not happen.

8. What Factors Are Driving Bitcoin?

9. The issue of crypto winter has been
rehashed time and time again. However
much we may be tired of hearing about it,
the year long crash of crypto currencies
left its stamp on the market. The
excitement of the 2017 to 2021 era is
gone. People are, hopefully, no longer
putting second mortgages on their home in
order to invest in Bitcoin.

10. Big money investors that jumped into
cryptocurrencies in expectations of profits learned
their lesson. Thus, the pool of Bitcoin enthusiasts
is smaller than it was a couple of years ago. A
factor that has driven prices of late is the prospect
of spot Bitcoin ETFs. The rationale is that these
investment vehicles would attract a whole new
class of investors. These would be folks with
money but who are not interested in having a
crypto wallet or keeping track of the keys needed
to access their assets in cyberspace.

12. What Happened to the Bitcoin Stock
Correlation?

13. According to Bloomberg, the relationship
between Bitcoin and the stock market has not
just weakened over the last month. It has
gone negative. At -.23 this means that stocks
and Bitcoin are moving in opposite directions.
The range of correlation goes from +1 which
means that two data sets are moving in
lockstep and -1 where two data sets are
moving exactly opposite of each other. Two
things come to mind. The stock market is
used to stocks going up and down, market
crashes, recoveries.

14. Despite the prior volatility of Bitcoin, the crypto
market never anticipated the total wipeout
that was crypto winter. The stock market
knows that lower interest rates are good for
stocks and investors are comfortable with that
market. Those who tried Bitcoin and got
burned are unlikely to try again. Those who
sat on the sidelines and said Bitcoin was
another Dutch tulip bulb market that was
going to fail were justified in their caution and
doubly unlikely to invest in crypto.

15. It would appear that investors are distinguishing
between Nasdaq and crypto which was not
necessarily the case a couple or three years
ago. As such, factors that drive stocks may be
less likely to affect cryptocurrencies going
forward and vice versa. Then there are the
regulatory issues that crypto will need to deal
with in the coming years. These are basically
things that the stock market already has in
place and not in any way negative for markets
like the Nasdaq.

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