This Bitcoin Rally Seems Different in Several Ways, But One Thing Stays the Same

As in previous bull runs, bitcoin's latest surge coincides with a burst of tech optimism on Wall Street. So traders might want to keep a close eye on a potential decline in the Nasdaq-to-S&P 500 ratio.

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  • Bitcoin continues to move in line with the ratio between the Nasdaq 100 Index and the S&P 500 Index.
  • The persistent positive relationship suggests that the inflow of money into cryptocurrencies, an emerging technology, is linked to a positive outlook for technology stocks relative to the broader equity market.

This bitcoin bull run stands out in several ways. For one, as Bloomberg's Joe Weisenthal explained in Wednesday's newsletter, the crypto community has been focused on market flows rather than narratives about how decentralized finance or Web3 will revolutionize traditional finance.

Another factor that makes this rally stand out is that prices have surged despite signs of strength in the U.S. dollar and Treasury yields, as opposed to 2020-21, when both were weakening.

One thing, however, remains the same. As in previous bull runs, the latest surge is accompanied by optimism directed toward technology stocks on Wall Street, characterized by a gain in the ratio between the tech-heavy Nasdaq 100 Index and the broader S&P 500, the NDX-SPX ratio.

Since early 2017, bitcoin and the ratio have moved in lockstep through rallies and declines, with the ratio hitting record highs a couple of weeks before the cryptocurrency. Bitcoin's move this week to record highs above $69,000 comes after the NDX-SPX ratio set a new lifetime high of 3.6 in late January. The pattern is similar to the one seen in 2020-21.

The positive correlation, clearly visible on the chart below, suggests that the inflow of money into cryptocurrencies, an emerging technology, is at least partly contingent on, or at least reflects, optimism regarding the outlook for technology stocks relative to the broader equities market.

Over the years, bitcoin has closely tracked the Nasdaq-to-S&P 500 ratio. (TradingView)
Over the years, bitcoin has closely tracked the Nasdaq-to-S&P 500 ratio. (TradingView) (TradingView)

According to charting platform TradingView, the 52-week correlation coefficient between bitcoin and the NDX-SPX ratio stood above 0.60 at press time. The correlation has been mostly positive since early 2017. A positive correlation indicates that both variables are moving in the same direction.

Note how BTC peaked with the NDX-SPX ratio in late 2021. Both entered a bear market in subsequent months, eventually bottoming out in December 2022.

That means traders looking for signs of bitcoin's path forward might want to keep a close eye on the NDX-SPX ratio. Relative weakness in technology stocks might weigh on bitcoin and the wider cryptocurrency market.

The consensus in the crypto market is that bitcoin's impending halving-induced supply reduction and the increased demand from spot exchange-traded funds (ETFs) will put the cryptocurrency on a path to $150,000 and higher.

Edited by Sheldon Reback.


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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.

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