Bitrabo Editorial
Currently, the best bearish argument on Twitter’s crypto sentiment echo chamber is that Bitcoin is not immediately following the Nasdaq and the rest of the stock market’s upward trend.
However, when we look at the long-term correlation of BTCUSD with the stock market, it remains “very strong,” and Bitcoin may have some catching up to do.
All of crypto Twitter right now: “#Bitcoin is showing such weak correlation with the Nasdaq”
Meanwhile, the correlation coefficient remains at a “very strong” 0.85 positive correlation on the monthly chart
There is just a little catching up to do pic.twitter.com/AbaJPhNx8U
— Tony “The Bull” (@tonythebullBTC) June 13, 2023
Stock Market Hits 52-Week High, Bitcoin Lags Behind
This week, the S&P 500 and Nasdaq 100 stocks reached new 52-week highs, but Bitcoin did not follow the trend. This observation quickly became a point of discussion on crypto Twitter.
However, if we look past any bias related to SEC drama, we can see that the correlation between BTCUSD and the NASDAQ index remains “very strong” according to the 1M correlation coefficient.
The correlation coefficient measures the strength and direction of the relationship between two assets, and it can be weak or strong, positive or negative. Portfolio managers search for negatively correlated assets to diversify risk as they do not move together.
On the other hand, a “very strong” correlation between positively correlated assets means that they move together, and the correlation coefficient between BTCUSD and NASDAQ shows a reading of 0.85 in the chart above.
Each time the NASDAQ outperforms Bitcoin and there is a lag in crypto, the market compensates for it with a massive catch-up move, as shown in the chart. This leads to speculation that becomes detached from reality, and crypto puts in a local top.
Currently, crypto is lagging behind the stock market. Will Bitcoin and other cryptocurrencies switch to relative outperformance once again, or is the crypto market fated this time?
For more information regarding this chart, please watch the CryptoBullGod video on YouTube linked below.
All In The Charts: Daily Bitcoin Crypto Livestream
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