Bitcoin and Nasdaq 100 break correlation: what happens next?

Bitcoin has broken its correlation with the Nasdaq 100, a potential turning point in how the cryptocurrency behaves as an asset class. While the tech-heavy index has climbed through October and November on strong Magnificent 7 earnings, Bitcoin has suffered a decline, falling from $126,000 to around $86,000, a drop exceeding 30% from last month's peak.

The divergence began in early October 2025 and has intensified through November, raising a critical question for investors: is this a temporary anomaly that will revert to historical patterns, or does it signal Bitcoin's maturation into an independent asset class?

Why Bitcoin and Nasdaq Moved Together

For years through to September 2025, many viewed Bitcoin as a high-beta version of the Nasdaq 100, amplifying the index's movements in both directions. During risk-off periods, both assets fell together, and when investor appetite for growth returned, both rallied in tandem.

This correlation does make some intuitive sense. Bitcoin previously attracted the same speculative capital that flowed into high growth tech stocks. Both assets benefit from loose monetary policy and suffer when the Federal Reserve tightens. 

The divergence began with the flash crash on 10 October 2025. The crypto market, heavily laden with leveraged long positions, experienced a cascade of forced liquidations that sent Bitcoin tumbling while the Nasdaq barely flinched.

This event exposed a fundamental difference: Bitcoin's decentralized, globally liquid market structure meant it reacted violently to crypto-specific dynamics that had zero impact on traditional equities. And the leverage unwind in cryptocurrency futures and options created selling pressure completely disconnected from corporate earnings or economic data.

Several crypto-native factors have possibly kept Bitcoin suppressed even as the Nasdaq strengthened:

1. ETF outflows have accelerated dramatically. US Bitcoin ETFs recorded $3.5 billion in net outflows during November alone, approaching the February record of $3.58 billion. BlackRock's IBIT (the largest with $68 billion in assets), saw an unprecedented $2.2 billion in redemptions, the biggest outflow since launch. This marks just the fifth month of overall outflows since these products debuted in early 2024.

2. Post-halving profit-taking intensified. Long-term Bitcoin holders who accumulated positions before and after the 2025 halving event began taking profits, creating sustained selling pressure independent of broader market sentiment.

3. Internal crypto market fatigue set in. After the initial enthusiasm surrounding spot ETF approvals in 2024 fueled a rally to new highs, trader exhaustion and reduced speculative interest created a vacuum where buying pressure evaporated.

4. Institutional capital rotated elsewhere. While short-term crypto traders unwound positions, institutional money flowed into mega-cap tech stocks benefiting from artificial intelligence demand and strong earnings reports. The Nasdaq gained from the same capital flight that hurt Bitcoin.

5. Monetary policy divergence emerged. Federal Reserve signals became hawkish, with Chair Jerome Powell warning a December rate cut wasn't guaranteed. This traditionally hurts risk assets like Bitcoin more severely than established tech companies with strong cash flows.

The Strategy wildcard

Strategy's role has complicated Bitcoin's path forward. The company holds over 50% of its assets in Bitcoin and faces a potential reclassification by MSCI that could force index funds to sell their shares.

MSCI's consultation phase closes at the end of the year with a final decision expected by 15 January 2026, and any implementation following in February. If MSCI reclassifies Strategy as a fund rather than an operating company, forced selling could create significant downward pressure on both the stock and Bitcoin itself.

CEO Michael Saylor insists Strategy remains an operating software business with $500 million in revenue and an innovative treasury strategy. Yet the market increasingly views it as a leveraged Bitcoin proxy. With Strategy's stock down over 60% from its mid-July highs, the reflexive feedback loop that drove Bitcoin purchases during bullish periods could reverse, taking bitcoin sentiment with it.

The Japan threat

Beyond crypto-specific factors, a broader crisis in Japan's bond market threatens all risk assets. Japanese government bond yields have surged to multi-decade highs, forcing Japanese institutions to repatriate capital from foreign markets.

For decades, Japanese banks and pension funds purchased trillions in US Treasuries and European bonds. Now, with domestic yields suddenly attractive and hedged returns on foreign bonds turning negative, massive capital withdrawal is underway. This creates a global liquidity squeeze hitting Bitcoin and tech stocks simultaneously.

When deleveraging cascades through the system, margin calls don't discriminate. Bitcoin, Nasdaq stocks and everything in between could get liquidated to meet obligations.

The Fed Chair change

Adding another layer of complexity to Bitcoin's outlook is the looming Federal Reserve leadership transition. Chairman Jerome Powell's term expires in May 2026, and President Trump is expected to announce his successor by the end of 2025, creating an unprecedented ‘shadow Chair’ scenario months before the official transition.

Bloomberg has cited White House National Economic Council Director Kevin Hassett as the frontrunner, largely due to his close relationship and longtime loyalty to Trump.

A Hassett appointment could dramatically shift monetary policy expectations. Trump has previously called Powell ‘stupid’ for the slow pace of rate cuts, signaling his preference for a more dovish approach. Hassett's proximity to the White House suggests a Fed potentially more willing to prioritize rate cuts and accommodate political pressure, precisely the type of loose monetary policy that has historically fueled cryptocurrency rallies.

For Bitcoin, a crypto-friendly nominee could begin shifting market expectations before even taking office. The mere announcement of a dovish Chair committed to lower rates and increased liquidity could provide the catalyst for recovery, particularly if combined with Trump's ability to appoint additional governors to fill recurring vacancies on the seven-member Board.

However, the transition also carries risks. A Chair perceived as too politically influenced could damage Fed independence, triggering market volatility that punishes all risk assets indiscriminately. 

Will Bitcoin and the Nasdaq converge or stay separated?

The debate centers on whether this change represents a temporary dislocation or a permanent shift in Bitcoin's market behavior.

Historical correlation tends to reassert itself during severe market stress. Bitcoin's long-term correlation with the Nasdaq remains positive, particularly during risk-off events. The recent divergence occurred while the Nasdaq strengthened, so if tech stocks begin falling, Bitcoin would likely follow.

Macroeconomic forces still link the two assets. Central bank policies and global liquidity conditions affect both Bitcoin and growth equities. Some consider that Bitcoin is currently undervalued relative to the Nasdaq and could benefit from mean reversion, especially if positive Nasdaq momentum returns.

However, Bitcoin's decline was driven by factors entirely unique to cryptocurrency markets: leveraged liquidations, ETF redemptions, and post-halving dynamics that have nothing to do with Nasdaq performance. On-chain data shows long-term holders remained steady during the downturn while short-term traders fled, suggesting the asset is maturing beyond pure speculation.

Perhaps most tellingly, Bitcoin has shown an asymmetric response, ignoring the Nasdaq's recent optimism while historically reacting to its pessimism. This suggests Bitcoin is becoming less responsive to traditional risk-on sentiment and more influenced by its own supply-demand cycles.

Near-term, Bitcoin faces continued pressure from ETF outflows, the Strategy overhang, and global liquidity withdrawal as Japan repatriates capital. It could test lower levels before stabilizing.

However, multiple monetary forces are aligning in Bitcoin's favor. Japan's $135 billion stimulus, potential $2,000 direct payments to U.S. citizens, China's $1.4 trillion support package, the Federal Reserve ending quantitative tightening and the likely appointment of a dovish Fed Chair all represent massive monetary expansion.

Gold's surge past $4,000 per ounce already signals capital rotation toward non-sovereign stores of value. Bitcoin, as a digitally native alternative immune to central bank manipulation, stands to benefit from the same dynamic once the immediate liquidity crisis passes.

The divergence from Nasdaq likely persists in the short term as crypto-specific pressures continue. But rather than the Nasdaq falling to meet Bitcoin or both rising to converge, a possible path involves Bitcoin recovering independently over the next several months as investors recognize the mounting credibility crisis in sovereign debt markets.

The key difference from past cycles may be that Bitcoin's recovery doesn’t require Nasdaq strength to fuel it. Instead, the cryptocurrency could find support from entirely different capital flows in the form of investors seeking protection from currency debasement rather than chasing speculative growth.

For investors, this represents both risk and opportunity. The correlation that made Bitcoin perhaps more predictable has broken, creating uncertainty. But that same independence could allow Bitcoin to rally even if traditional markets struggle, particularly as questions about government debt sustainability intensify.

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