Bitcoin and Nasdaq Divergence: Historical Trends Reveal the Future of the crypto market

Recently, an intriguing phenomenon has emerged in the Crypto Assets market: Bitcoin's movements have diverged from those of the Nasdaq index. While the Nasdaq continues to hit new highs, Bitcoin is on a downward trend, dragging the entire Crypto Assets market down significantly. This contradicts the traditional view that the two have a positive correlation. So, what is the logic behind this? Have there been similar situations in history? This article will attempt to explore the changes in correlation between the two across different time dimensions by reviewing the current and previous bull runs.

In fact, Bitcoin does not always maintain a fixed positive correlation with the US stock market, but shows different degrees of correlation at different cycle stages. Looking back at the last bull run and this bull run, we can identify several patterns:

1. The starting and ending points of the rise for both are completely consistent in the time dimension.

2. There are differences in the process of the rise of both. The rise of the Nasdaq is relatively stable, presenting a nearly fixed slope straight line on the candlestick chart. In contrast, Bitcoin's rise is closer to exponential growth, with a slow initial increase, followed by a rapid surge after a certain point in time. Interestingly, the "turning point" time for this accelerated rise corresponds to the moment when the Nasdaq stabilizes after its first pullback during the rising phase.

3. The first peak of Bitcoin corresponded to the second pullback small platform during the rise of the Nasdaq.

So, which stage in history does the current position of the market correspond to? Is there a traceable pattern to the situation where the US stock market is rising while Bitcoin is falling?

Observations show that for most of both bull runs, Bitcoin maintained a positive correlation with US stocks, although negative correlation phases occurred, they were not dominant. In the last bull run, after Bitcoin peaked for the first time, the Nasdaq continued to rise, but Bitcoin corrected, leading to a divergence in the two's movements. This is similar to the current market situation, as history seems to be repeating itself in the same place.

So, what will the future market direction be? How long will the divergence between Bitcoin and the NASDAQ continue? How will the divergence restore? From the perspectives of time and intensity:

1. In the last bull run, the duration of divergence between the two was not long, approximately 9 weeks on the weekly chart, after which it returned to a positive correlation ( at the weekly level ).

2. In the last bull run, the point in time when the two regained positive correlation was when there was a significant weakening of the fall momentum at the daily level of Bitcoin and reached an important support level.

If measured by historical standards, the current market has not yet fully met the conditions for divergence recovery and needs to wait for more K-line information. So, how can we logically understand this special common trend that appears in both bull runs?

Whether it's Bitcoin, gold, or U.S. stocks, they all exist in the same macro environment, with prices constrained by factors such as financial liquidity and the yield on risk-free assets. Bitcoin, as a more elastic asset class, can strongly rise during the early stages of a bull run, significantly outperforming U.S. stocks. However, extremes lead to reversals; there is no eternal strength. After a major rise, there can be a situation where it underperforms U.S. stocks, which reflects a similar relationship to that between altcoins and Bitcoin.

From another perspective, during the main upward phase, the market liquidity is sufficient to support the overall rise in asset prices. However, after rising to a certain level, the upward momentum may become exhausted, making it difficult to sustain a collective rise across all asset categories, which could lead to a situation where some assets fall while others rise.

From the perspective of event factors, the market has recently been affected by selling pressure from the German government and certain institutions. Regardless of how this segment of the trend is interpreted, Bitcoin will eventually restore its positive correlation with the US stock market after sufficient adjustment.