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Shade D.
Nov 29, 2022

Bitcoin And Nasdaq Correlation, Is it a good index?

#cryptocurrency#cryptonews#btc
tl;drThe correlation between Bitcoin and the Nasdaq 100 index has gained the attention of crypto market analysts for a while. Some assume this correlation is a bad sign for Bitcoin and the philosophy of decentralisation. Yet, others consider it a positive event for investors as it helps better understand price fluctuations. This article will go through Bitcoin and Nasdaq correlation over the last few years. You’ll learn why it is essential to know about this correlation and how it can help you predict Bitcoin prices.
Bitcoin And Nasdaq Correlation, Is it a good index?
Bitcoin And Nasdaq Correlation, Is it a good index?
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What Is Bitcoin And Nasdaq Correlation?

The historical price of Bitcoin and Nasdaq 100 indicates that their correlation has increased over the last few years. Analysing Bitcoin correlations, we previously talked about the correlation between Bitcoin and Stock Market, where we analysed the relation between Bitcoin’s price and S&P500.

Here, we will take a closer look at another stock market index, i.e., Nasdaq 100, and track its correlation with Bitcoin’s price. 

What Is Nasdaq 100?

The Nasdaq 100 is a stock market index comprising the 100 largest US companies traded on the Nasdaq Stock Exchange. The companies listed are from various industries, except for the finance sector.

The index started the activity in the market on Dec 2, 2006, and replaced the former Nasdaq Composite Index.

The History Of Bitcoin And Nasdaq Correlation

We can track the correlation between Bitcoin and the stock market back to the beginning of Bitcoin's emergence. The historical price of Bitcoin and Nasdaq 100 indicates an upward correlation between Bitcoin and Nasdaq 100. However, in 2018 the correlation decreased.

We cannot state a clear reason for this, but we all know that 2018 was the worst year for stocks because of all the financial crises worldwide.

After 2018, the correlation between Nasdaq 100 and Bitcoin again increased. Figure 1 and Table 1 show the correlation data of Bitcoin and Nasdaq 100 from 2014 to 2022.

It is another sign that undermines the idea that the stock market and, generally, cryptocurrencies are independent of each other.

Figure 1: The Correlation Between Bitcoin and Nasdaq 100
Figure 1: The Correlation Between Bitcoin and Nasdaq 100

As the above graph shows, people started using Bitcoin as a hedge to protect their wealth against other asset fluctuations.

There was a correlation between Bitcoin and Nasdaq 100 before 2018, but it gradually increased and reached %78 between 2020 and 2021!

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Pros And Cons Of Bitcoin And Nasdaq Correlation

As mentioned before, there are many contradictory opinions regarding the correlation between Bitcoin and the Stock market. This correlation has both pros and cons. Here is the main advantage and disadvantage of this correlation:

  • Pros: The correlation between Bitcoin and Nasdaq 100, along with other indices, opens up opportunities to better understand Bitcoin’s price movements.
  • Cons: One of the main reasons for investing in the crypto market and Bitcoin was their independence from other metrics. Some investors believe that any dependencies between Bitcoin and the stock market are disappointing because this makes Bitcoin even riskier, and volatility of the stock market can affect Bitcoin’s price.

FAQ

Still, you might have many questions regarding the correlation between Bitcoin and the stock market. Here are the answers to the most frequently asked questions.

Why Bitcoin and Nasdaq 100 Is Correlated?

The correlation between Bitcoin and Nasdaq 100 is because of the increased presence of institutional investors in Bitcoin, which has caused a dramatic increase in the number of Bitcoin traders.

Is Bitcoin Correlated to Stock Market?

Yes, it is undeniable that cryptocurrency and stock prices are somewhat correlated. The stock market, particularly tech companies, and cryptocurrencies have been closely correlated over the past year. Over the summer of 2022, the association was strong, and the correlation between bitcoin and the S&P 500 was almost one-to-one.

The correlation was 0.74 in January 2020 but rose to 0.91 by July 2021. In addition, there was a high correlation between Bitcoin (BTC) and Nasdaq Composite Index (NDAQ) from January 2020 to July 2021 at 0.76.

What Is Bitcoin Symbol In Nasdaq?

Bitcoin has been listed on Nasdaq, and its symbol is BTC.

What Stocks Are Tied to Bitcoin?

Since the price of Bitcoin has mirrored the prices of blue-chip tech firms like Apple, Amazon, and Microsoft all year, the correlation between cryptocurrency and the stock market is growing, especially with tech stocks.

Which Stocks Are More Correlated to Cryptocurrency Market?

Among all companies in the stock market, those in the tech sector are correlated to Bitcoin and cryptocurrency prices.

The main reason behind this correlation is that these companies create computer hardware to mine Bitcoin and altcoins. Their progress in building products related to the crypto market can influence the market.

Moreover, tech companies are among the main investors in the cryptocurrency market.

Conclusion

All the signals in the market point out that the correlation between the stock market and Bitcoin is increasing over time, and we can use it as a tool to predict the market.

As you read in this article, according to the historical data of Nasdaq 100 and Bitcoin, there is a significant correlation between the two. Tracking the correlation rate over time can help us get a better understanding of the Bitcoin price trend in the future.

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