Bitcoin (BTC/USD) vs. Nasdaq: Is the Correlation Affecting Crypto Outflows?

Bitcoin has shown a strong recovery from a recent decline, climbing from approximately $89,000 earlier this week to nearly $98,500 following the Consumer Price Index (CPI) release. This bounce back has been remarkable, especially considering the sharp selloff caused by the stronger US Dollar and various U.S. jobs data earlier in the week.

Initially, Bitcoin dropped to its weekly low around $89,000 on Monday. However, by the end of that day, it had bounced back to just below $95,000. The largest cryptocurrency by market capitalization continued to gain, hitting a high of $97,339, aided by softer-than-expected U.S. Producer Price Index (PPI) data. Despite this rally, Bitcoin encountered resistance near the critical 50-day moving average.

ETF Flow Data Shows 3 Successive Days of Outflows

Recent data regarding exchange-traded funds (ETFs) indicates that Bitcoin has experienced three consecutive days of net outflows, with Monday seeing the most significant outflow of $284.1 million, followed by an additional $209.8 million on Tuesday. Such outflow trends could be affected by the growing correlation between Bitcoin and the Nasdaq index.

Analysts are keen to see whether the ETF flows will recover in the lead-up to the inauguration of Donald Trump next week. This correlation between Bitcoin and the Nasdaq could stem from multiple factors, with the recent K33 Research report noting that the ties between the two assets are strengthening.

K33 Research Report – Nasdaq vs Bitcoin Correlation

The latest findings from K33 Research highlight that the cryptocurrency market, specifically Bitcoin, is facing similar challenges as the broader global markets. Their report indicates that the correlation between Bitcoin and the Nasdaq has reached its highest point in 2024 over the last month. This increasing connection suggests that Bitcoin and tech stocks may be increasingly moving in tandem.

According to K33's analysis, Trump is likely to advocate for policies that bolster the economy, possibly extending past tax cuts and offering more breaks for the working class. Such policies could enhance the attractiveness of riskier investments, including cryptocurrencies. Additionally, the report hints that Trump may embrace crypto-friendly regulations, which would be beneficial for the sector.

The growing correlation between Bitcoin and the stock market may explain the recent outflows, as institutional investors view Bitcoin as a hedge in their portfolios. However, if this trend continues, it could split allocations among stocks and Bitcoin, rather than keeping them distinct.

Commenting on this trend, VanEck’s CEO, Jan van Eck, stated that the close correlation between Bitcoin and the Nasdaq over the past six months is disappointing. He stressed that diversification should ideally exhibit minimal correlation, as seen in historical data over the last decade.

Trump Inauguration to Fuel Crypto Rally?

As optimism builds around Trump’s potential presidency, there’s increasing speculation about a significant influx of capital into Bitcoin in 2025. Estimates from CryptoQuant suggest that approximately $520 billion in new capital could flow into Bitcoin, aided by favorable regulatory and economic conditions. This sentiment is echoed by Pantera Capital, which believes that Trump’s inauguration could spark a bullish trend for cryptocurrencies, potentially pushing Bitcoin to new heights.

As the inauguration date approaches, market participants will be closely monitoring this scenario.

US Data Could Temporarily Drive Bitcoin's Price

The recent U.S. inflation data presented softer figures than expected, raising questions about its potential influence on Bitcoin's move toward the $100,000 milestone.

Technical Analysis – BTC/USD Rests at Critical Juncture

From a technical perspective, Bitcoin is currently navigating a critical juncture in its price movement on the daily chart. Price action has been somewhat erratic, as there has been no definitive break below the previous swing low around $91,800. Following a brief dip below the $90,000 mark, Bitcoin's quick rebound underscores the ongoing buying pressure.

At this moment, BTC/USD is evaluating its position at the 50-day moving average. A successful break above this indicator could initiate further gains, while failing to do so may lead to a significant pullback. In either case, traders will be watching key support levels at $95,000, $91,804, and $90,000, in addition to resistance levels at $100,000, $102,261, and $103,647.

Bitcoin, Nasdaq, Correlation