Bitcoin Mirrored Nasdaq In January 2022

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Over the past few years, Bitcoin was seen as a sharply fluctuating risk asset. In January of this year, as analysts remarked, it has pretty much mirrored the fall of the Nasdaq, the US stock market that mostly reflects the state of the tech stocks in the market.

It comes as more professional traders enter the digital finance arena and Wall Street does a risk-off in tech at the same time as it does in crypto. Does that also mean that the next time tech stocks go up, crypto will as well?

This week Bitcoin’s correlation to the Nasdaq reached an all-time high.

With no catalyst to cause idiosyncratic flows to BTC, for the time being, it is just following risk-off behavior from equities with a high beta. pic.twitter.com/ZJwfwGsDNk

— Will Clemente (@WClementeIII) January 21, 2022

Increased correlation

Zach Pandl, a markets analyst at global business bank Goldman Sachs admits that the correlation of Bitcoin with US tech stocks, crude oil and government bonds has risen significantly since the start of the Covid-19 pandemic. But what he saw in January, surprised even him.

Zach explained:

Prior to the pandemic, bitcoin and other digital assets showed low correlations to traditional financial market variables — in effect, crypto behaved as an entirely different ecosystem.

But over the last two years, as bitcoin has seen wider mainstream adoption, its correlation with macro assets has picked up.

Check out this #Bitcoin & $NASDAQ fractal👀

What if??😱😱 pic.twitter.com/TaNWPRFfvl

— Nebraskan Crypto (@NebraskanCrypto) January 21, 2022

It would appear that Bitcoin has now become an asset class that investors pile into whenever they are taking an optimistic view of the economy and then sell off when they are nervous. This summary was also shared by Nick Metzidakis of digital asset specialist Tyr Capital.

Metzidakis claimed:

Over the last five years, Bitcoin has been positively correlated to the Nasdaq, effectively behaving like a ‘risk-on’ asset. That relationship has been stronger since the beginning of 2020 and suggests Bitcoin is seen as a ‘risk-on’ or ‘technology play’.

At the end of February, we’ll see if the mirroring trend is held up.