Blocksmith Says: BTC to Gain From Nasdaq Correlation

27 June 2022

Having given Bitcoin a fairly thorough going over in last week’s notes and with nothing particularly noteworthy going on in price today and over the weekend, I thought we could glance across at tech-heavy Nasdaq futures quickly. 

There’s an >88% positive correlation with Bitcoin year-to-date and the read through from one series to the others is well established among fund managers and traders. 

The chart here frames the 27% some decline from the end of March. This was the second big push down from the mid-November 2021 drop. The two declines in the set were neatly divided by a 17% rally, which pretty much went straight up without pause from mid-March. 

The overall shape therefore is that of a steep zigzag down. I mention this because were these the early sections of a monster move down that had a lot further to go, it would very likely not look like this. The zigzag here: down, steep up in the middle, and down again formation is that of a correction rather than an impulsive runaway down move. And if its a correction then by definition the underlying longer trend is up. 

Another thing to note is that the first leg down (November to mid-March) very nearly matches the second leg down (end March to mid June) in percentage terms. Again, this is characteristic of a zigzag correction.  

Note also the sharp bullish divergence in RSI, the horizontal base break and the channel test. The overall picture here is suggesting strong up and recovery. This will positively impact Bitcoin sentiment, other things being equal. 

Christopher Grafton
Christopher Grafton

Chris has been working in the markets for over 15 years variously as a broker, analyst and researcher. He is the author of a well-known book on Hurst cycles analysis, and runs his own market analysis software platform on Bloomberg. He’s also a keen student of both the cello and Brazilian Jiujitsu.

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