Historical data indicates that bitcoin often hits key bottoms when its correlation with the Nasdaq 100 turns negative—a pattern now occurring for the fourth time in five years.
Bitcoin is once again diverging from traditional risk assets, and this latest decoupling may be signaling a pivotal market moment. Previous periods of negative correlation between bitcoin and the Nasdaq 100 have often coincided with major lows for the cryptocurrency, and the current setup mirrors these earlier turning points.
The 20-day correlation has fallen to -0.43, marking the fourth negative reading since 2020. Similar stretches in mid-2021 and August 2024 preceded significant recoveries. While bitcoin is often considered a high-beta tech-like asset, the current divergence from the Nasdaq stands out as particularly pronounced.
The performance gap is evident. Bitcoin has dropped as much as 36% from its October all-time high, whereas the Nasdaq 100 has only pulled back 8% and now trades just 2% below its record peak. Bitcoin remains 27% off its own high.
Past episodes of negative correlation have typically emerged during periods of market stress. The most recent occurred amid the yen carry trade unwind, which drove bitcoin down to roughly $49,000 before marking a local low. In September 2023, bitcoin dipped just below $30,000 before rallying to $40,000 by year-end. The first instance came in May 2021 during China’s mining crackdown, when bitcoin fell from $60,000 to $30,000 before rebounding to new highs later that year.
Taken together, these patterns suggest that negative correlation between bitcoin and the Nasdaq 100 often surfaces near significant market turning points. While the current environment hints at the possibility of another bottom forming, the timing and strength of any rebound remain uncertain.
