BTC and Nasdaq continue to diverge. How do you view the future market trend?

Original title: "Exploring the Relationship between BTC and Nasdaq"

Original author: Lisa, LD Capital

Recently, BTC and Nasdaq have diverged. Nasdaq has continuously set new highs while BTC has fallen and led to a significant decline in the overall Crypto market. This is inconsistent with the traditional impression that Nasdaq and BTC are positively correlated. So what is the logic behind this? Has there been a similar situation in history? This article will try to explore the strength and change of the correlation between the two in different time dimensions by reviewing this round and the previous bull market.

In fact, BTC and US stocks are not positively correlated with a fixed coefficient, but have different degrees of correlation at different stages of the cycle. Looking back at the last bull market and the current bull market, we can find several rules: 1. The initial starting point and final end point of the rise of the two are completely consistent in time (the starting point of the last round of rise was 2020/3 the peak of the last round was 2021/11 the starting point of this round of rise was 2023/1) 2. The rising process of the two is different. The speed of the rise of the Nasdaq is relatively stable, and the K-line shows a straight line with a nearly fixed slope. BTC is different. The rising process is closer to exponential growth. The initial rising rate is relatively slow, and there is a rapid rise after a certain point in time. Coincidentally, the time of this accelerated rise "turning point" corresponds to the first pullback and stabilization in the rising stage of the Nasdaq.

(2020/10 2023/10)

3. At the same time, the first peak of BTC corresponds to the second small correction platform in the rising stage of Nasdaq

(2021/4 2024/3)

So which stage in history does the current market position correspond to? Is there any trace of the rise of US stocks and the fall of BTC that the market is experiencing?

It can be found that for most of the two bull markets, BTC and US stocks maintained a positive correlation, and negative correlation stages appeared but were not dominant. In the last bull market, after BTC peaked for the first time, the Nasdaq continued to rise, but BTC pulled back, and the two trends diverged (the yellow box in the figure below), which is similar to the current market situation. History has repeated itself in the same place again.

How will the market trend go in the future? How long will the divergence between BTC and Nasdaq last? How will the divergence recover? From the perspective of time and strength:

1. In the last bull market, the divergence between the two did not last long. On the weekly chart, it lasted for about 9 weeks, and then recovered to a positive correlation (weekly level).

2. In the last bull market, the time when the two recovered their positive correlation was when the BTC daily level showed obvious decline and reached an important support position.

If we use historical standards to measure, the current market has not yet fully met the conditions for divergence recovery, and we need to wait for more K-line information. So how to logically understand this special common trend that appeared in both bull markets. Regardless of whether BTC, gold, or U.S. stocks are in the same macro environment, their prices are subject to factors such as financial liquidity and risk-free asset yields. As a more resilient asset type, BTC can rise strongly in the early stages of the bull market and significantly outperform U.S. stocks, but things will turn around when they reach their extremes, and there is no eternal strength. After the main rise, it is weaker than the U.S. stock market, which is similar to the relationship between altcoins and BTC. From another perspective, in the main rising stage, market liquidity is sufficient to support the overall rise in asset prices, but after rising to a certain extent, the fuel or power of the rise is exhausted, and it is difficult to support the collective rise of all categories of assets, and there may be a situation where one asset rises while the other falls. From the perspective of event-type factors, the market has recently been affected by the selling pressure from the German government and Mentougou. No matter how to interpret this trend, BTC will eventually return to a positive correlation with U.S. stocks after the adjustment is fully in place. (The above is the author's personal opinion for reference only)

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