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25/04/2025
Short-term high correlation with the Nasdaq should not be over-interpreted
Since the beginning of 2023 bitcoin has clearly outperformed gold and the Nasdaq Composite Index (Nasdaq).[1] For a long time, “digital gold,” as some enthusiasts characterized bitcoin, was seen as an attractive way to become independent of stock markets, especially on Wall Street, even in turbulent times. However, recent weeks have shown again that bitcoin can also come under pressure in times of uncertainty and market weakness.
Euphoria about the launch of bitcoin ETFs and talk of holding bitcoin reserves under Donald Trump had driven the bitcoin price sharply higher in the second half of 2024. But so far this year bitcoin has temporarily taken a significant hit. The general increase in risk aversion in response to the new president's policies has made investors skeptical about cryptocurrencies too. And crypto’s weakness occurred almost in lockstep with weakness in the Nasdaq: The correlation between the two asset classes reached an exceptionally high level in February and March. It should be noted, however, that such a high correlation only exists in certain market phases. Not only historical analysis shows that the correlation is much lower over longer periods. For example, since Donald Trump announced his wide-ranging tariffs on April 2, 2025, Bitcoin has once again significantly outperformed the Nasdaq.
In periods of heightened uncertainty it was not surprising that gold, the perceived classic safe-haven asset,[2] showed its strength; it has outperformed Bitcoin and the Nasdaq by a wide margin so far in 2025. So it seems that nervous investors in turbulent times still place their trust in traditional physical gold rather than “digital gold” in the form of Bitcoin.
ChartLine chart with 3 lines. indexed, 1/1/2023 = 100 The chart has 1 X axis displaying The chart has 1 Y axis displaying indexed, 1/1/2023 = 100 End of interactive chart. | ChartLine chart with 3 lines. indexed, 1/1/2025 = 100 The chart has 1 X axis displaying The chart has 1 Y axis displaying indexed, 1/1/2025 = 100 End of interactive chart. |
Sources: Bloomberg Finance L.P., DWS Investment GmbH as of 4/23/25
In general terms we can say that Bitcoin lost just under 32% between its high of slightly above 109,000 dollars on January 20 and its significant interim low on April 7. By comparison, the maximum loss during the Nasdaq's recent downtrend was just under 27%.
However, bitcoin has since recovered somewhat more strongly than the Nasdaq. A possible support factor for bitcoin could be the increasing questioning of the U.S. dollar as a stable global reserve currency. The Bloomberg Dollar Spot Index fell sharply in April.
It is quite conceivable that bitcoin could fall again (along with the Nasdaq) if the market rally ends and there is another sell-off as risk sentiment deteriorates again. However, bitcoin could remain in demand in the short term if the dollar continues to weaken. In our view, bitcoin is not yet a safe haven and is likely to remain volatile for the foreseeable future. However, market perceptions are slowly changing and it remains to be seen if there is a growing belief in bitcoin as a hedge against geopolitical and macroeconomic tensions.
All market data, unless otherwise quoted, from Bloomberg Finance L.P. as of 4/23/25
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