Nasdaq plummeted, gold soared, where will Bitcoin go?

Author: Peter Schiff

The Nasdaq index has fallen 12%. If the adjustment evolves into a bear market and the correlation between Nasdaq and Bitcoin remains unchanged (i.e. for every 12% decline in Nasdaq, Bitcoin falls 24%), then when the Nasdaq drops to 20%, the Bitcoin price may remain at about $65,000. However, if the Nasdaq enters a real bear market, the decline could be much more than 20%.

Historical data shows that after the technology bubble burst, the Nasdaq index plummeted by nearly 80%; during the 2008 financial crisis, it fell by 55%; and when the epidemic broke out in 2020, the Nasdaq index also fell by 30%. The average decline in these three bear markets was about 55%. Even if the bear market falls slightly, at only 40%, Bitcoin's decline could reach 80%, that is, to around $20,000. But considering the high volatility of Bitcoin, if the selling wave intensifies, it is not impossible to fall below $20,000 or even hit a lower price.

On the other hand, the correlation between gold and Nasdaq has been negative. Since the Nasdaq peaked on December 16, 2023, gold has risen 13%, almost forming a perfect 1:1 negative correlation. If this trend continues, gold prices may break above $3,800 when the Nasdaq drops to 40%. However, if the stock market plunges and the significant depreciation of the US dollar in the forex market are accompanied by the US dollar, gold may well rise above $3,800.

If gold prices rise to $3,800 and Bitcoin falls to $20,000, the price of Bitcoin denominated in gold will fall by more than 85%. This will completely crush the market expectations of Bitcoin’s “digital gold” or “store of value” assets. By then, governments and institutional investors will lose reasons to hold Bitcoin, and the United States and state governments will not include Bitcoin in their strategic reserves. In addition, Bitcoin ETF investors may also sell their assets in large quantities, further aggravating market selling pressure. In this case, companies such as MicroStrategy that hold large amounts of Bitcoin may find it difficult to maintain the stability of their balance sheets and ultimately face bankruptcy risks.

Overall, if the stock market plunge is similar to the historical trend, gold may become the ultimate safe-haven asset, and Bitcoin's market positioning will be severely challenged. Whether Bitcoin can successfully break away from the risky asset attributes of technology stocks in this environment and truly establish the value positioning of "digital gold" will become the key to future market attention.