Coin World Network reports:
Author: Lisa, LD Capital
Recently, a divergence has been observed between BTC and the NASDAQ trend, with the NASDAQ continuously reaching new highs while BTC declines, leading to a significant downturn in the overall crypto market. This contradicts the traditional impression of a positive correlation between the NASDAQ and BTC. What is the logic behind this, and has a similar situation occurred in history? This article will attempt to explore the correlation between the two across different time dimensions by reviewing the current and previous bull markets.
In fact, BTC does not have a fixed positive correlation with U.S. stocks but varies at different stages of the cycle. A review of the last bull market and the current one reveals several patterns:
1. The initial starting point and final endpoint of both rises are completely consistent in terms of time
(Last round’s starting point: March 2020 & Last round’s peak: November 2021 & This round’s starting point: January 2023)
2. The process of their rise is different
The NASDAQ’s rise is relatively stable, showing a nearly fixed slope straight line on the K-line chart
BTC, however, is different; its rise is closer to exponential growth, with a slower rate of increase initially and a rapid ascent at a certain point, coincidentally corresponding to the first pullback stabilization during the NASDAQ’s rise.
(October 2020 & October 2023)
3. BTC’s first peak also corresponds to the second pullback plateau during the NASDAQ’s rise
(April 2021 & March 2024)
So, which historical stage does the current market position correspond to, and is there a traceable pattern to the current situation of U.S. stocks rising and BTC falling?
It is observed that for most of the time during the two bull markets, BTC maintained a positive correlation with U.S. stocks, with negative correlation phases occurring but not dominating. In the last bull market, after BTC’s first peak, the NASDAQ continued to rise, but BTC pulled back, leading to a divergence in their trends (the part in the yellow box in the chart below), which is similar to the current market situation, with history repeating itself at the same point.
What will be the subsequent market direction, how long will the divergence between BTC and the NASDAQ continue, and how will it recover? Looking at time and intensity:
1. In the last bull market, the divergence did not last long, lasting about 9 weeks on the weekly chart, before returning to a positive correlation (weekly level).
2. In the last bull market, the point at which they returned to a positive correlation was when BTC showed a clear decline in intensity on the daily chart level and reached an important support position.
If measured by historical standards, the current market has not yet fully met the conditions for divergence recovery, and more K-line information is needed. So, how can we logically understand this unique common trend that appeared in both bull markets? Whether it’s BTC, gold, or U.S. stocks, they are subject to the same macroeconomic environment, and their prices are constrained by factors such as financial liquidity and risk-free asset yields. BTC, as an asset class with better elasticity, can strongly surge at the beginning of a bull market, significantly outperforming U.S. stocks. However, there is no perpetual strength, and after the main rise, it becomes weaker than U.S. stocks, similar to the relationship between altcoins and BTC. Another perspective is that during the main rise phase, market liquidity is sufficient to support the overall rise in asset prices, but after rising to a certain extent, the fuel or momentum for the rise becomes exhausted, making it difficult to support the collective rise of all asset classes, leading to a situation where some rise and others fall. From an event-driven perspective, the market has recently been affected by pressure from the German government and Mentougou. Regardless of how this trend is interpreted, ultimately, BTC will return to a positive correlation with U.S. stocks after sufficient adjustment (The above is the author’s personal opinion for reference only).