Bitcoin drops from the Nasdaq-100 for the first time in four years
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After four years of trailing the Nasdaq-100 (NDX), Bitcoin has moved its 40-day correlation with the index to zero, marking its independence from the equity index, which has been tightly controlled by tech firms.
The Nasdaq-100 Stock Market Index tracks the performance of 101 stocks in the technology, healthcare, consumer goods, services and industrial sectors listed on the Nasdaq exchange.
Independent research and investment firm Fairlead Strategies recently published a report stating that the correlation between Bitcoin and NDX will be lower in the coming months.
“Given the approval of the spot bitcoin ETF and the possibility of a decline in April, we think the correlation between bitcoin and NDX will be lower in the coming months,” said Katie Stockton, founder and managing partner of Fairlead Strategies.
Based on market movements since 2023, Bitcoin (BTC) price movements have diverged from the patterns of traditional benchmark values such as the S&P 500 stock index and gold. Now BTC has separated from the Nasdaq-100 index for the first time in four years.
Stockton added, “You generally see lower correlations in bull markets than in bear markets for risky assets.”
A decoupling occurs when the prices of two assets or asset classes that have been historically correlated begin to move in different directions. This can happen when macroeconomic factors, new regulations or technological changes affect one asset more than the related asset.
According to Stockton, Bitcoin has begun to trade more on sector-specific news rather than following broader financial market movements, remaining agnostic to the NDX.
The 40-day correlation measures how similar the movements of two assets (such as stocks or tokens) have been over 40 days. It uses a Pearson correlation coefficient of -1 to 1. A coefficient of 1 indicates that the assets move in exactly the same direction as -1 means that they move in opposite directions. A coefficient near 0 means the assets were uncorrelated and their movements were uncorrelated over a 40-day period.
Historically, the correlation between BTC and NDX has been mostly positive in early 2020. The correlation peaked at 0.8 (1 indicating a fully positive correlation) when 2022 faced one of the most extreme bear markets.
Such decoupling shows the growing decoupling and decoupling of crypto from equity markets, showing how assets are decoupled. Simply put, this means a growing awareness of the maturity of Bitcoin as an asset class.
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