Crypto rues Bitcoin’s decoupling from AI-fuelled tech stock gains

encryption Fans are now paying a price bitcoinWeak correlation with technology stocks.

The top digital assets posted a monthly decline in May for the first time in 2023, while the Nasdaq 100 added nearly 8 percent amid the hype. artificial intelligence.

The 30-day correlation coefficient for Bitcoin and the high-tech Nasdaq 100 Index is about 0.2 versus 0.8 in May 2022. A reading of 1 indicates that the asset is moving with a steady step, while minus 1 shows that it is moving in opposite directions.

Digital asset investors were pleased with the decline in cryptocurrency-equity correlation earlier in the year, when tokens were rallying and stocks were left behind. The implications of the split are now less favorable.

“Some private risk has finally returned to these assets as opposed to everything being the same,” said Pieter van Duijwert, Head of Multi-Asset Solutions at Man Group. He added that the Nasdaq Stock Exchange is receiving a boost from the Amnesty International hype.

Bitcoin’s rally this year has faded to 64 percent after last month’s drop of about 8 percent. The token is down more than 1 percent to $26,734 as of 10:51 a.m. in Singapore on Thursday. Smaller coins such as Ether and XRP have also been on the back foot.

Back in the pandemic era of massive stimulus, stocks of cryptocurrency and technology companies rose in tandem. Since then, ties between tokens and a variety of traditional assets have weakened in the wake of the 2022 crash in virtual currencies that ended up waning investor interest in the market.

“dynamic” links

Stéphane Ouellet, CEO of FRNT Financial Inc. , an institutional platform focused on digital assets: “Relationships have been and will continue to be dynamic in the space with growth in adoption and changing investment theses dominating trading windows.”

The Nasdaq 100 has jumped 30 percent this year and some analysts are wondering how sustainable the gains will be given that a handful of big names helped drive the rally.

In the long run, decoupling from the Nasdaq and big tech stocks is likely to be beneficial for digital assets, according to Alex Coffey, chief trading strategist at TD Ameritrade.

For now, the AI ​​hype may continue to divide crypto and tech posts.

Partly due to the AI ​​narrative, “there is room for Nasdaq to beat the major cryptocurrencies, as bitcoin and ether have been trading range-bound with low implied volatility and weak spot demand,” said Chris Newhouse, an independent crypto derivatives trader. .