Bitcoin’s Correlation with Nasdaq Keeps Increasing; Here’s Why It’s Bad News

A chart created by Dominic Chu of CNBC shows that Bitcoin’s correlation to Invesco QQQ (a popular ETF that tracks the tech-heavy Nasdaq 100 Index) has reached a score of 0.894. This is the highest score in almost three years.
It is important to note that 1 would indicate an exact correlation.

The fact that the flagship cryptocurrency trades almost as a stock in tech stocks undermines the ‘inflation-hedging’ narrative that helped propel the asset to record highs last year.

Bitcoin is now being seen as a speculative investment, rather than a legitimate store-of-value. This is a complete contradiction to the claims made by those who marketed Bitcoin as a revolutionary asset.

Tech stocks were also affected by the cryptocurrency’s massive plunge. Recent losses of 22.4% in value have seen the Nasdaq Composite suffer its worst quarter since 2008. Bitcoin has recently posted its worst quarterly performance in over a year after it collapsed by 58%.

The graph above shows that convergence with the Nasdaq began rapidly increasing after institutional investors bought into the ‘inflation-hedge’ narrative following unprecedented monetary support by the U.S. Federal Reserve.

The double whammy between the ominous technical signs, and the unfavorable macro background is expected to cause Bitcoin’s price to continue falling.

It is widely believed that the Fed will announce another jumbo rate increase this month, following the surprise jobs report. This should reduce unfounded recession fears.