Bitcoin reclaims status as hyper-leveraged play on US tech stocks
Congrats! Through a sophisticated cryptography-based peer-to-peer currency you have created “the Nasdaq 100, but on steroids.”
It’s often said that all cryptocurrencies like bitcoin do is offer leveraged exposure to US tech stocks.
That is, they move the same direction, but are just way, way more volatile. This line of thinking undercuts other arguments for owning crypto, like that it’s a play against alleged US dollar debasement, hedges inflation risk, or protects against disorder in the traditional financial system.
Over the long haul, that diagnosis has been borne out by the data. For the past decade, bitcoin’s beta to the Nasdaq 100 has been about 4.6 — that is, if the US tech-heavy gauge rallied 1% in a given week, you’d expect bitcoin to be up about 4.6% during the same period.
But interestingly, for much of the past year, this relationship has broken down. From March through mid-October, the beta of the weekly changes in bitcoin vs. the Nasdaq 100 was faintly negative. The two tended to move in opposite directions each week, and didn’t really have that strong connection. Tech stocks continued to ride the AI boom while bitcoin largely languished.
Now, amid the parabolic postelection surge in all things crypto? It’s baaaaaaaaack.
Bitcoin’s rolling three-month beta to the Nasdaq 100 has spiked as the cryptocurrency approaches $100,000 — and if we used shorter time-frames, it’d be considerably higher!
