Key Takeaways:
- Tech stocks tumbled on Oct. 25, dragging the Nasdaq composite down.
- Bitcoin price’s correlation with the Nasdaq 100 is also declining.
- BTC price is correcting after reaching its highest level since May 2022.
NEW DELHI (CoinChapter.com) — A steep drop in the share price of tech giants like Alphabet (NASDAQ: GOOGL) and Amazon resulted in the Nasdaq 100 dropping over 2.47% on Oct. 25.
A disappointing performance by Alphabet’s cloud business resulted in the firm shedding more than $166 billion in market value, marking its biggest loss ever.
Other tech giants, like Amazon and Nvidia, also registered losses, forcing the tech-heavy Nasdaq index to paint one of its first declines of 2023.
Moreover, the correction underscores a key highlight among investors who favor tech stocks that the AI hype is now dying. Early 2023 saw the markets riding high on the AI wave, with ChatGPT and other AI tools making the news every day.
Various tech firms launched AI chatbots, with new function-specific chatbots cropping up every other day. Market participants speculated new developments in technology would likely help the bull run continue. However, it seems macro cues have resulted in investors looking at other options.
Bitcoin Correlation With Nasdaq, S&P 500 is Dropping
At the same time, Bitcoin’s correlation with traditional investment options is dropping. The 30-day correlation between Bitcoin, the S&P 500, and the Nasdaq Composite is becoming increasingly negative.
As Bitcoin adoption spread, the crypto token’s price action began to mirror the movement of the traditional financial markets, giving birth to the correlation metric. A positive correlation with stocks means that the BTC price is in lockstep with the share market.
Conversely, a negative correlation usually means BTC price goes up as stock market prices tumble. Ideally, crypto proponents would prefer a negative correlation to preserve Bitcoin’s narrative as digital gold.
Since Blackrock filed its ETF application on June 15 earlier this year, Bitcoin’s correlation with the traditional markets has been especially volatile. With Nasdaq, BTC price’s correlation swung from -0.72 on June 15 to 0.53 a month later.
However, since August 2023, the correlation has been on a downward slope. As gains in the stock markets slowed down, BTC prices continued posting higher highs. The prime crypto rode on a number of bullish cues, including several spot crypto ETF applications by major investment firms.
As the tech-dominated Nasdaq index plummets, investors might turn their attention to Bitcoin and other crypto assets.
BTC Price Corrects After 23% Gains In Seven Days
Bitcoin price pared gains on Oct. 26, dropping nearly 2.5% to reach a daily low near $33,980. The correction came after a nearly 11-day-long rally that helped the BTC price break above $35,000 on Oct. 24, the first time since May 2022.
However, as is the norm, bears started booking profits, forcing the BTC price to drop below $35,000.
Additionally, the overbought RSI level, with a score of 85.51, likely contributed to the bearish cues against the BTC price. Overbought RSI levels have historically preceded a reversal or consolidation phase for assets, which is why traders consider the occurrence a bearish signal.
If the selling continues, the BTC price might drop to the support near $32,740. Moreover, breaching the immediate support level could force bulls to defend the 20-day EMA (the red wave) support near $30,500.
Conversely, a continued uptrend might result in the BTC price breaking past the immediate resistance near $36,000 to target the resistance near $37,980.
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