Why A Lack Of Bitcoin Following Stocks Is Nothing To Fear

The best bearish argument for the cryptocurrency room on Twitter right now is the fact that bitcoin is not immediately following the NASDAQ and the rest of the stock market is heading higher.

However, when zoomed out, the long-term correlation remains “very strong” and BTCUSD could have a bit of a catch-up.

All Twitter encryption now: “# Bitcoin It shows such a weak correlation with the Nasdaq index.”

Meanwhile, the correlation coefficient remains at a “very strong” positive correlation of 0.85 on the monthly chart.

There is a bit of catching up pic.twitter.com/AbaJPhNx8U

– Tony “The Bull” (tonythebullBTC) June 13, 2023

The stock market rose to a 52-week high, leaving cryptocurrencies far behind

This week, the S&P 500 hit a new 52-week high, trailing the Nasdaq 100 and technology stocks. One asset that does not track, however, is Bitcoin. And crypto bears want to make sure you know that.

It quickly became a hot topic among crypto Twitter. But removing the red glasses and any bias related to the ongoing SEC drama, the facts are simple: the correlation between BTCUSD and NDX remains “very strong” according to the 1M correlation coefficient.

The correlation coefficient measures the strength and direction of the relationship between assets. Correlations can be weak or strong, positive or negative. Portfolio managers look for assets with negative correlation to diversify risk because these assets do not move together. In contrast, positively correlated assets move together.

The Bitcoin and Nasdaq correlation remains “very strong,” and is likely to continue

The above chart highlights the fact that the correlation between BTCUSD and NDX is giving a “very strong” reading of 0.85. The perfect positive correlation would be 1, making the top cryptocurrency and tech stock basket as tight as most asset correlations.

Furthermore, the chart shows that every time NDX outperforms Bitcoin and there is a lag in the cryptocurrency, the market more than makes up for it with a massive catch-up move.