Bitcoin Correlation With Tech Stocks Drops As Ethereum Rises 20% In 3 Days

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You may think that with Bitcoin trading in the $19k to $21k for almost a month now, all the news is bad. However there is light at the end of the tunnel.

Although both crypto and stock markets remain bearish at this point and are anxiously awaiting what the Fed and the ECB respectively will do with regards to interest rates, there seems to be a decoupling between tech stocks and Bitcoin ongoing.

The fact that Ethereum has shrugged off the $1,000 level (we discussed this important support level on Wednesday) it was defending earlier this week and is now trading at $1,200 is also good news.

Lower correlation

The 40-day correlation coefficient for the world’s largest cryptocurrency, Bitcoin, and the tech-heavy Nasdaq stock index has remarkably fallen below 0.50, which means it is now at levels last seen in January. In essence, traders believe it is now less risky to invest in Bitcoin at this point than in certain tech stocks.

This is remarkable as for most of the past two years (aka during the Covid-19 pandemic) Bitcoin was moving in mostly the same direction as tech stocks as both investments in Silicon Valley and crypto were seen as risk-on. After Bitcoin hit a high in November of last year, it lost about 70% of it’s value, which is the same amount that some tech stocks went down as well (Netflix, Paypal, Shopify, Roku, Coinbase, etc.).

Whereas the tech markets keep falling though, Bitcoin seems to have found a (perhaps temporary) bottom and has been trying to break through the $21k barrier several times in the past few weeks.

Vijay Ayyar of crypto exchange Luno said that:

If we see signs of this this month or even over the next few months, it would give more confidence to the market that a bottom is in across all risk assets including equities and crypto.

With Ethereum gaining almost 12% on Friday and Bitcoin 6%, we wonder whether a summer crypto rebound has started?