Written by Hazel J. Greene, Senior Analyst

Last week, the Nasdaq (NDX) experienced a significant retreat, indicating a potential reversal in its recent gains. However, a deeper analysis suggests that the underlying bullish trend of tech stocks might not be over just yet. In fact, drawing a historical comparison, this could have positive implications for Bitcoin, the leading cryptocurrency.

Currently, the Nasdaq is down by over 3% from its record high in 2023. This decline can be attributed to traders opting to take profits and reposition themselves ahead of the upcoming Federal Open Market Committee (FOMC) meeting, scheduled for this week. Market expectations point towards the introduction of another 25-basis point rate hike by the US Federal Reserve during the meeting. It is worth noting that the rising interest rate environment in 2022 had previously resulted in bearish trends for stocks and cryptocurrencies alike. The rapid recovery seen throughout the year was largely influenced by the anticipation of a pause in rate increases. Therefore, the resumption of rate hikes at this stage could potentially hinder the recent market rebound.

Despite the current setback, the bullish momentum of the Nasdaq appears to be quite resilient. The NDX, an index representing top US tech stocks, seems poised for yet another all-time high. This assessment is supported by the weekly Average Directional Index (ADX) on the NDX. From a historical perspective, the NDX’s relentless performance has often outshone cryptocurrencies, particularly during the 2020 crypto bull run.

Furthermore, it is essential to acknowledge that tech stocks frequently lead broader financial market recoveries. The resurgence of economic health, as indicated by the strength in this sector, has historically instilled confidence, leading to the flourishing of cryptocurrencies like Bitcoin and Ethereum. Thus, a revived bullish momentum in tech stocks could have positive implications for Bitcoin’s performance.

By comparing the previous market scenario with the current one, a noteworthy pattern emerges. In the chart, we can observe that following a brief retracement in tech stocks, Bitcoin experienced a breakout, exhibiting significant outperformance. The key similarity between then and now is the similar trend strength showcased by both the NDX and BTCUSD, indicating a possibility of repeating a divergent price action.

During the prior instance, when the Nasdaq retraced, Bitcoin followed suit. However, when Bitcoin resumed its bullish trend, it transformed into a completely different entity, skyrocketing from $10,000 to $60,000 in a matter of a few months. Given Bitcoin’s current price of around $30,000 per coin, replicating the same performance could potentially drive the cryptocurrency closer to $180,000 per coin if the price action unfolds similarly.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The cryptocurrency market is highly volatile, and readers should conduct thorough research before making any investment decisions.