Bitcoin is not a refuge ── Close correlation with Nasdaq / S&P500 ratio | coindesk JAPAN | Coindesk Japan

The price of Bitcoin (BTC) surged 23% in March as several US banks failed and recession fears grew.

Multiple analysts called the rally a safe haven rally, with investors fleeing to BTC, the top crypto asset by market capitalization, as banks collapsed. believed to have contributed to the increase.

However, Bitcoin is rising in tandem with the Nasdaq 100 index to S&P 500 index (NDX/SPX) ratio, on hopes that the US Federal Reserve (Fed) will soon cut interest rates. Higher risk appetite contributed, if not the main reason, to the rise.

The NDX/SPX ratio measures the relative difference in valuations between technology stocks, represented by the Nasdaq 100, and a broad basket of stocks such as the S&P 500.

The ratio rose 5.65% in March, marking the best monthly performance since February 2009. That’s because volatility in the banking sector has prompted traders to reinvigorate bets on a Fed rate cut later this year. The Nasdaq surged nearly 10%, well above the S&P 500’s 3.5% gain.

The 90-day correlation coefficient between Bitcoin and the NDX/SPX ratio rose from 0.81 to 0.90, indicating the strongest positive relationship between the two assets since June 2022. The correlation coefficient was 0.89). A positive correlation means that on days when this ratio rises, Bitcoin is likely to rise as well, and vice versa.

Noelle Acheson, author of the popular newsletter “Crypto Is Macro Now,” commented on the positive correlation between Bitcoin and the NDX/SPX ratio: “BTC still trades like a risky asset. “It has said. “A rising NDX/SPX ratio means that tech is doing well, indicating strong risk sentiment,” she said.

Tech stocks tend to be more sensitive to interest rate expectations than the broader market. A rise in the ratio is therefore identical to dovish Fed expectations and an improvement in investor risk appetite, often spilling over to other assets such as cryptocurrencies, as we have seen in 2020 and early 2021. often viewed. On the other hand, a decrease in the ratio indicates a risk-off mentality.

“Similar to crypto assets, growth companies that are expected to provide cash flow or some kind of value in the future are more affected by interest rate fluctuations. It is made up of multi-modal sectors that are sensitive to rising or falling interest rate expectations,” Gabriel Selby, lead research analyst at CF Benchmarks, told CoinDesk in an email.

Selby said interest rate expectations are taking the lead as the NDX/SPX ratio tracks the crypto markets closely, and the divergence between stock and crypto market prices is not as wide as initially thought. He added that it suggested it was possible.

Both Bitcoin and the NDX/SPX ratio bottomed out in the second half of 2022. (TradingView/CoinDesk)

The correlation between Bitcoin and the NDX/SPX ratio has remained consistent during the 2022 bear market and from May 2020 to March 2021, when Bitcoin rose nearly 10x to reach $60,000. was a plus.

If that’s not enough, both have been on a straight line since early January. The ratio is up 11.26% while Bitcoin is up nearly 70% this year.

Bitcoin’s stop around $28,000 since March 22 is also consistent with the NDX/SPX ratio.

Acheson notes that bitcoin appears to be associated with volatility in the NDX/SPX ratio in the short term, but may benefit from fiat currency devaluation concerns in the long term.

“Bitcoin is (and will continue to be) a risky asset for traditional investors, and may be seen as a safe haven,” said Acheson. “While short-term moves will be driven by shifting theories of what financial liquidity will look like, we expect continued accumulation from long-term investors interested in the nature of currency depreciation hedging.”

｜Translation: coindesk JAPAN
｜Editing: Toshihiko Inoue
｜Image: TradingView/CoinDesk
｜Original: Bitcoin’s Tight Correlation With Nasdaq-SPX Ratio Muddies Safe Haven Narrative