Exploring the Divergence Phenomenon Between BTC and NASDAQ

Recently, an interesting phenomenon has emerged in the market: Bitcoin ( BTC ) has shown a significant divergence from the Nasdaq Index ( Nasdaq ). While the Nasdaq continuously reaches new highs, BTC is on a downward trend, leading to a substantial decline in the entire cryptocurrency market. This phenomenon contradicts the common perception that BTC and the Nasdaq have a positive correlation. So, what is the logic behind this? Has there been a similar situation in history? This article will attempt to explore the strength and changes of the correlation between the two over different time dimensions by reviewing the current and previous bull markets.

In fact, BTC does not always maintain a fixed coefficient of positive correlation with the US stock market, but shows varying degrees of correlation at different cyclical stages. By analyzing the last bull market and the current bull market, we can identify the following patterns:

1. The starting and ending points of the two rises are highly consistent in the time dimension.

2. There are differences in the upward processes of the two.

   • The rise of the Nasdaq is relatively stable, showing a nearly fixed slope line on the candlestick chart.
   • The process of BTC's rise is more akin to exponential growth, with a relatively slow initial increase, followed by a rapid surge after a certain point in time. Interestingly, this "turning point" of accelerated growth often corresponds in timing to the moment when the NASDAQ first stabilizes after a pullback during its upward phase.

3. The first peak of BTC usually corresponds to the second pullback small platform during the upward phase 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 BTC is falling?

Through observation, we found that during most of the two bull markets, BTC did indeed maintain a positive correlation with US stocks. Although there were phases of negative correlation, they were not dominant. In the last bull market, after BTC peaked for the first time, the Nasdaq continued to rise while BTC retraced, resulting in a divergence between the two. This is quite similar to the current market situation, as history seems to be repeating itself at the same point.

So, how long will the divergence between BTC and the Nasdaq continue? How will the divergence recover? From the perspectives of time and strength:

1. In the last bull market, the divergence between the two did not last long. From a weekly perspective, the duration was about 9 weeks, after which it returned to a positive correlation.

2. In the last bull market, the time point at which the two regained positive correlation was when there was a significant decline in BTC's daily chart and it reached an important support level.

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

Whether it is BTC, gold, or US stocks, they are all constrained by the same macro environment, with prices affected by financial liquidity, risk-free asset yields, and other factors. As a more resilient asset class, BTC can strongly rise in the early stages of a bull market, significantly outperforming US stocks. However, extremes lead to reversals; there is no perpetual strength, and after a major rise, BTC may underperform US stocks, similar to the relationship between altcoins and BTC.

From another perspective, during the main rising phase, the market liquidity is sufficient to support the overall increase in asset prices. However, after rising to a certain extent, the fuel or power for the increase may become exhausted, making it difficult to sustain the collective rise of all categories of assets, leading to a situation where some assets rise while others decline.

From the perspective of event factors, the market has recently been influenced by German government policies and the selling pressure from certain large holders. Regardless of how this segment of the trend is interpreted, BTC will ultimately restore its positive correlation with the U.S. stock market after adequate adjustment.