Historical trends suggest that bitcoin often finds a floor when its correlation with the Nasdaq 100 breaks down—a pattern now appearing for the fourth time in five years.

Bitcoin is once again decoupling from traditional risk assets, and the latest divergence may be signaling an important inflection point. Periods of negative correlation between bitcoin and the Nasdaq 100 have frequently aligned with major market lows for the cryptocurrency, and the current backdrop mirrors several earlier reversals.

The 20-day correlation between the two assets has slipped to -0.43, marking the fourth negative reading since 2020. Similar stretches in mid-2021 and August 2024 accompanied meaningful bitcoin bottoms. Although bitcoin is often characterized as a high-beta tech-adjacent asset that amplifies broader market trends, its current divergence stands out.

Bitcoin has dropped as much as 36% from its October all-time high, while the Nasdaq 100’s pullback has been comparatively mild—a maximum drawdown of just 8%, with the index now trading only 2% below its record peak. Bitcoin, by contrast, remains 27% off its high.

Previous episodes of negative correlation have emerged around key market stress events. The most recent occurred during the yen carry trade unwind, which drove bitcoin down to around $49,000 before marking a local low. Prior to that, a similar breakdown in September 2023 saw bitcoin hovering just below $30,000 before it rallied to $40,000 by year-end. The earliest instance in this series appeared in May 2021 during China’s mining crackdown, when bitcoin plunged from $60,000 to $30,000 before ultimately recovering to new highs later that year.

Together, these periods indicate that negative correlation between bitcoin and the Nasdaq 100 has tended to appear near major turning points. While the current setup hints that another bottom may be forming, the timing and strength of any rebound remain uncertain.