Bitcoin seems to be between market regime change and narrative change, reflected in the dynamics of correlations with other assets. Kaiko Research analysts, in their latest reports, reveal a significant decoupling between Bitcoin and the tech-heavy Nasdaq 100 index while also noting a surge in the correlation with gold.
According to Kaiko Research, the correlation between Bitcoin and the Nasdaq 100 has plummeted to a mere 3%, its lowest level in almost three years, indicating a possible decoupling is in the works. The Nasdaq 100 index tracks the performance of major non-financial companies listed on the Nasdaq stock exchange.
It should be said, though, that Nasdaq 100 is technically entered a bull market, with a 20% rise since its December 2022 lows. So at first glance, it may look like not the kind of decoupling that everyone has been waiting for.
“The main reason for the declining correlation is that Bitcoin has been largely impacted by crypto-specific events, like the recent regulatory environment,” — Dessislava Ianeva (research analyst at @kaikodata), Decrypt.
Conversely, Bitcoin and gold have exhibited a notable surge in correlation, surpassing 50% (the highest level in several years), as indicated by another Kaiko report.
Both assets experienced significant rallies in 2023. Gold, despite a recent dip, has maintained an upward trajectory throughout the year, reaching an all-time high of $2,000 in May. Bitcoin, on the other hand, has enjoyed a remarkable rally, surpassing $31,000. This increasing correlation may suggest a potential alignment between Bitcoin and gold as alternative investment choices at the current phase of the market cycle.
Bitcoin's recent price action has been significantly impacted by macroeconomic factors. Correlations with gold, interest rates, and US dollar strength have become more pronounced, emphasizing Bitcoin's role as a macro-driven asset. Meanwhile, a new narrative is emerging, emphasizing 2023 as the year of the Bitcoin spot ETF. If this narrative gains traction, Bitcoin's price dynamics could temporarily detach from macroeconomic indicators.
Source: Kaiko Research
The evolving correlation dynamics between Bitcoin and traditional markets offer valuable insights into the changing landscape of the crypto market. The decoupling from the Nasdaq 100 suggests Bitcoin's increasing independence from the traditional risk markets, while the surge in correlation with gold highlights its potential as a safe-haven asset.Such a shift looks reasonable for the supposed return of the “digital gold” narrative and potential bitcoin boom (see Tuur Demeester’s with Adamant Research excellent April report as highly recommended further reading).