The Nasdaq (NDX) retreated last week, leaving behind a bad-looking candle. However, when you measure the strength of the underlying trend, tech stocks may have a lot more going for them. And if so, it could be bullish for Bitcoin according to a new historical comparison.
Nasdaq (NDX) pares recent gains ahead of FOMC meeting
The Nasdaq is down more than 3% from a 2023 high set last week as traders took profits and repositioned ahead of Wednesday’s FOMC meeting. At the meeting, the US Fed is widely expected to introduce another rate hike of 25 basis points.
The rising interest rate environment of 2022 sent stocks and cryptocurrencies into a bearish market. The idea of a Fed pause helped markets recover throughout the year. Resuming rate hikes so soon could be detrimental to the market’s recent recovery.
However, the uptrend may be too strong at this point to stop the Nasdaq, a leading index of US technology stocks, from reaching a new all-time high. This is according to the weekly moving average index on the NDX.
In the chart below, the NDX Weekly Average Leading Index is seen at a level ahead of 2020 in crypto. In particular, during this time, tech stocks greatly outperformed cryptocurrencies.
Will BTC catch up to tech stocks?| NDX on TradingView.com
Why the setup could revive a bullish Bitcoin
It’s also worth noting that tech stocks tend to lead broader financial market recoveries. Historically, this sign of returning economic health has seen cryptocurrencies like Bitcoin and Ethereum thrive on the resulting confidence.
In the comparison above, after a brief reversal in the basket of tech stocks, Bitcoin then broke out and stole the show with extreme outperformance. The most important similarity between then and now is that the NDX and BTCUSD are demonstrating the same trend strength as the last time the divergence in the correlated price action occurred.
In the latter case, Bitcoin pulled back at the same time as the Nasdaq pulled back, but when it resumed its uptrend, it turned into a very different cryptocurrency. It was parabolic BTC went from $10,000 to $60,000 in just a few months. With Bitcoin near $30,000 per coin, another 6x performance from here could take the top cryptocurrency closer to $180,000 per coin if price action develops similarly.