Bitcoin, although starting the year with a bang has now been quiet so far in terms of performance, especially following its peak back in March. Despite the halving in April of this year, Bitcoin has experienced modest gains compared to the excitement of previous years.
According to Ecoinmetrics, a platform known for providing insights into the cryptocurrency market, Bitcoin is up more than 30% year-to-date. In comparison, NASDAQ gained around 20% over the same period.
Bitcoin And NASDAQ: The Tightening Gap
Ecoinmetrics shared a chart in its recent post on X illustrating the narrowing gap and showing how the year-to-date returns for Bitcoin and the NASDAQ have started to converge.
Earlier in the year, BTC saw a significant return spike, particularly following the launch of several Bitcoin ETFs in the US, which boosted BTC prices. However, as the year progressed, Bitcoin’s performance lost steam, allowing NASDAQ to catch up.
This closing gap between Bitcoin and the NASDAQ suggests that Bitcoin is becoming more correlated with traditional financial markets. This shift could have implications for its role as an alternative asset.
The gap between Bitcoin and the NASDAQ is closing.
Year-to-date Bitcoin is up about 34% while the NASDAQ has gained 20%.
It’s been a quiet year for Bitcoin so far. Besides the ETF launch boosting prices early on there have been no major drivers pushing Bitcoin forward. pic.twitter.com/LCGf8iuG6d
— ecoinometrics (@ecoinometrics) August 22, 2024
What Does This Mean For BTC?
According to Ecoinmetrics, “We’re now heading into a period of potential volatility.” This potential volatility could be largely tied to macroeconomic developments, particularly in the United States.
Historically, Bitcoin has shown sensitivity to changes in US monetary policy, especially regarding interest rates. Lower interest rates tend to encourage investment in riskier assets as the returns on traditional savings and bonds decrease, making BTC an attractive alternative for investors seeking higher returns.
However, the flip side of this scenario is the looming risk of a recession, which could dampen investor enthusiasm and lead to a more cautious market environment.
Ecoinmetrics’ analysis suggests that while Bitcoin has held its ground so far, its performance in the coming months will be heavily influenced by the broader economic trend.
The Federal Reserve’s potential rate cuts could provide the liquidity boost needed to drive Bitcoin higher, but if economic conditions deteriorate, BTC may struggle to maintain its current trajectory.
Meanwhile, BTC is currently up 1.4%, with a trading price of $60,575 at the time of writing. It is worth noting that before this current price, the asset had seen a notable spike to trade at nearly $62,000 earlier today.
Featured image created with DALL-E, Chart from TradingView